The Merger between PNC & Sterling Financial

PNC Financial Services Group announced today it signed an agreement to buy Sterling Financial Corp. for $565 million in stock and cash.

Sterling Financial, Bank of Hanover's parent company, will merge into PNC under the purchase agreement.

PNC expects the acquisition to close sometime in the beginning of 2008, the company said in a press release.

The companies expect to merge in third-quarter 2008. The deal is dependent on shareholder and regulatory approval.

The $565 million price translates to roughly $19 per share of Sterling stock.

"This acquisition provides a meaningful entry into several of the fastest growing Pennsylvania counties and joins our Pennsylvania markets of Harrisburg and Philadelphia to our new Greater Baltimore region," said PNC President Joseph C. Guyaux.

Sterling had been working to restore is capital after uncovering a loan scandal earlier this year. The scandal was expected to result in an after-tax charge of $145 million to $165 million to the company's financial statements for 2006.

Nasdaq trading network issued a letter to delist Sterling Financial's common stock from the market after Sterling Financial's first-quarter report for 2007 was delayed because of an internal investigation. Sterling began an investigation in April after financial irregularities were found at Equipment Finance LLC.

In May, Sterling also consolidated four affiliate banks: Bank of Hanover, Pennsylvania State Bank, Bay First Bank and Bank of Lancaster N.A. The measure was intended to maximize capital and maintain Sterling's daily business operations. The consolidated banks became divisions of BLC Bank, which was to benefit from the $80 million credit agreement Sterling Financial took out late last month with Manufacturers and Traders Trust Co., parent firm of M&T Bank.

The credit agreement was to repay outstanding debt from its Equipment Finance LLC affiliate and to reinforce the operating capital of BLC Bank NA, Sterling Financial's primary subsidiary.

Stockholders have also filed class-action lawsuits against Sterling Financial alleging the company violated federal securities laws by issuing materially false and misleading statements. The alleged violations were said to have artificially inflated the price of the company's stock and occurred from April 27, 2004, to May 25, 2007.

The merger brings expanded banking possibilities to Sterling customers, said Sterling President and Chief Executive Officer J. Roger Moyer Jr.

"It is a great transaction for our shareholders and adds a level of convenience and product depth that will enhance the banking experience for the Sterling customer," Moyer said. "Our customers will be able to bank across the mid-Atlantic area utilizing PNC's extensive branch, ATM, and online banking network."

All Sterling stock options have vested as a result of Sterling's agreement with PNC, according to a press release. Options not exercised by the closing date will convert to PNC options for the remaining term at the conversion date.

source:www.eveningsun.com