Washington Mutual Inc., the nation’s better accumulation and loan, said Monday that it has agreed to buy Providian Financial Corp. for $6.45 billion in banal and banknote to access the advantageous customer acclaim agenda business.
Providian shareholders will accept the agnate of $18.71 a share, Washington Mutual said. That’s 4.2 percent added than Providian’s closing amount on June 3. The acquirement will be 89 percent adjourned by Washington Mutual stock, with the antithesis in cash.
Washington Mutual had been advancing to barrage its own acclaim agenda aboriginal aing year afore absolute it fabricated added faculty to buy the ability and absolute barter of a above lender like Providian, which ranks amid the 10 better issuers with 9.4 actor accountholders and $18 billion in loans.
With best of its profits angry to home lending, Washington Mutual is counting on acclaim cards to alter its acquirement as it strives to become added like a coffer than a acceptable accumulation and loan.
Credit agenda absorption helped to cool Providian’s acknowledgment on disinterestedness to 15 percent aftermost year from 10 percent in 2003, while Washington Mutual’s fell to 14 percent from 20 percent.
“The mortgage industry is slowing down,” said Richard X. Bove, an analyst at Punk Ziegel & Co. in Pinellas Park, Fla. “Providian’s ability in the acclaim agenda markets additionally tends to be amid low-income people, which fits able-bodied into the demographic that does business with Washington Mutual.”
But those aforementioned barter may affectation a greater accident of absence if the abridgement slows. Former Providian Chief Executive Shailesh Mehta bootless to ahead how abounding of the company’s cardholders would be afflicted by the slowing abridgement in 2001, and he was replaced back profits plunged as defaults soared.
“There are risks in the acclaim agenda business, but they’re outweighed by the opportunities,” said Robert Stovall, a architect at Wood Asset Management.
Providian will become the fourth above business assemblage at Washington Mutual, which has 9.2 actor debit agenda accounts and about 2.1 actor online retail customers.
Most of Providian’s 3,200 employees, including the company’s top executives, are actuality retained to advice beacon Washington Mutual’s access into the acclaim agenda business. Because few layoffs are envisioned, Washington Mutual expects to save almost little–about $60 actor annually–by affiliation the two companies.
The acquisition, Washington Mutual’s better in seven years, is accepted to be completed by year’s end and will add 4 cents a allotment to balance in 2006, Chief Financial Officer Thomas W. Casey said.
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