Capital One (COF) to acquire Chevy Chase Bank

Posted Dec 4th 2008 4:40PM by Michael Fowlkes
Filed under: Deals, Products and Services, Competitive Strategy, Market Matters, Recession

Capital One (NYSE: COF) and Chevy Chase Bank join the long list of bank mergers that we have seen this year, as Capital One announced today that it would be acquiring Chevy Chase Bank for $520 million in cash and stock.

Over the past couple of years, Capital One has acquired several regional banks as it moves to become a major player in the full banking services industry, after getting its start as primarily a credit card company. The move to acquire Chevy Chase Bank, which is headquartered in Bethesda, MD, involves a cash payment of $445 million in and 2.56 million shares of stock.

McLean, Va.-based Capital One is one of the banks that received part of the recent government bailout, reportedly getting $3.56 billion in exchange for preferred stock and warrants to purchase common stock.

Today's move is probably a smart decision for Capital One, as the company looks to diversify as much as possible in order to combat upcoming losses from its credit card and subprime businesses. Today's move should provide a bit more diversification and give the company a little better mix of funding.

Capital One stated that the Chevy Chase acquisition should result in higher operating earnings during 2009. The deal is expected to close during the first quarter, and Capital One added that it expects to incur about $225 million of charges for the acquisition and integration costs.

As we mentioned earlier, this is just one of several bank mergers that we have seen this year. Here is a table with a couple of the other big names that merged in the year:

While this is the most recent bank merger to join the list, I would hardly bet on it being the last, as the current credit crunch and economic slowdown continues to tighten their grips on the average American.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.

Tags: acquisitions, Capital One, CapitalOne, Chevy Chase Bank, ChevyChaseBank, COF, credit cards, CreditCards, financials, inthenews, mergers, subprime