Spanish Bank to Buy Sovereign for $1.9 Billion

Spanish bank Banco Santander, S.A. will acquire Sovereign Bancorp in a stock-for-stock transaction valued at about $1.9 billion, the companies announced recently. Under the terms of the agreement, Sovereign shareholders will receive 0.2924 Banco Santander American Depository Shares for every 1 share of Sovereign common stock they own. Based on the recent closing stock price for Santander ADSs, the transaction is valued at approximately $1.9 billion, or $3.81 per share. Santander, the largest bank in the euro zone by market capitalization, currently owns 24% of Sovereign's ordinary outstanding shares. The Chairman of the Capital and Finance Committee of Sovereign's Board of Directors said given unprecedented uncertainty in the current market environment and the challenges facing Sovereign, they believe this is the right transaction at the right time for Sovereign. The Wyomissing, PA-based Sovereign is grappling with increasing loan losses. Its 2nd-Q net charge-off rate more than tripled from 2007 levels. But the deal is subject to necessary bank regulatory approvals in the U.S. and Spain and approval by both companies' shareholders.