Magazine article American Banker

Riggs-PNC Looking Alive, Though Initial Price Isn't

Magazine article American Banker

Riggs-PNC Looking Alive, Though Initial Price Isn't

Article excerpt

Shares of Riggs National Corp. rose Wednesday and those of PNC Financial Services Group Inc. fell amid investor confidence that the two will complete their deal after all.

Riggs' stock may have gotten a lift from a report in Wednesday's Washington Post that to clinch the PNC deal, Riggs was trying to reach a settlement with the Justice Department by the end of January over alleged money-laundering violations.

Citing unnamed sources, the article said PNC could seek to reduce the deal price by the amount of any potential fine. Riggs, which is based in Washington, believes the Pittsburgh company would call off the deal if a settlement with the Justice Department is not reached by the end of the month, the article said.

Few industry watchers see the deal going through as planned in July, when PNC agreed to pay $779 million in stock and cash, or $24.25 a share, for Riggs.

The deal raised eyebrows on Wall Street. The $5.9 billion-asset Riggs had been fined $25 million in May by the Office of Comptroller of the Currency and the Financial Crimes Enforcement Network for alleged violations tied to money laundering.

PNC, which has had its own regulatory troubles in the past, assured Wall Street that it was up to the task of absorbing Riggs. New issues have emerged since July, however: a lawsuit by families of 9/11 victims, and a Justice Department investigation into links between Riggs and former Chilean dictator Augusto Pinochet.

Nonetheless, recent trading by arbitrageurs, traders who attempt to profit on announced mergers and acquisitions, suggests that they think the deal will get done.

Shares of PNC had a bumpy ride last year but mostly rose in the second half along with most bank stocks. Riggs' shares began to fall in September, opening a gap in the two stocks' relative performance that suggested arbitrageurs doubted the deal would go through. …

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