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BofA's $35 Bil Buy Of Card Firm MBNA Will Create Biggest Credit Card Issuer; Cross-Selling, Cost Cuts Eyed; Not done with Fleet buy, Bank of America pays up, again, to keep expanding.(A)
Byline: LAURA MANDARO
Bank of America agreed to buy credit card issuer MBNA Corp. for $35 billion, creating the largest U.S. card company and marking a sudden end to the once staunchly independent MBNA.
The deal, pulled together in just a week, would give Bank of America a 20% share of the credit card market, above Citigroup and JPMorgan Chase. The Charlotte, N.C.-based retail and commercial banking giant will have a lead in the "affinity card" market with $143 billion in outstanding card balances.
BofA offered 0.5009 share of its stock plus $4.125 in cash for each MBNA share, a 30% premium to Wednesday' close. On Thursday, MBNA shot up 24% to 26.16. BofA fell 3% to 45.61, making the deal worth $26.97 a share.
MBNA's decision to sell after a rocky few quarters underlines the pressure facing stand-alone card companies. Their commodity-type business of small consumer loans has slowed after the rapid expansion of consumer card debt during the past decade.
End Of Independence Day
Investors speculate other independent card lenders may be next -- especially since the MBNA deal comes on the heels of Washington Mutual's deal to buy card issuer Providian earlier this month. Also, Morgan Stanley has said it'll consider selling its Discover card unit.
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