Washington Mutual, Inc. it has entered into a definitive agreement to acquire Providian Financial in a stock and cash transaction valued at approximately $6.45 billion. The transaction brings together two of the nation’s leading financial services companies focused on serving middle market consumers.
“Today’s transaction enhances Washington Mutual’s consumer banking growth while strengthening our leadership position in the middle-market customer segment,” said Kerry Killinger, chairman and chief executive officer of Washington Mutual. “Providian is a highly profitable business with solid credit quality. Its focus on middle market consumers makes Providian a natural fit for our business and a winning combination for both companies’ customers.”
“This combination also helps to further diversify our balance sheet and earnings by adding attractive, high-yielding credit card assets, while improving our net interest margin and adding stable fee income,” added Killinger.
The transaction is expected to be accretive within a year on both a GAAP and cash basis.
Washington Mutual said Providian will become the company’s fourth major business unit and will continue to operate out of its current headquarters in San Francisco. Washington Mutual also said it plans to retain Providian’s management team and infrastructure, making the integration low risk and allowing for a quick and seamless transition.
Under the terms of the agreement, shareholders of Providian will receive consideration based on a fixed exchange ratio of .45 Washington Mutual common shares for each Providian share. The merger consideration will be paid 89 percent in stock and 11 percent in cash. The stock consideration will be determined by multiplying the fixed .45 exchange ratio by 0.89, and the cash consideration will be determined by multiplying the .45 ratio by the product of 0.11 and the average closing stock price of Washington Mutual for the 10 trading days immediately preceding completion of the merger. Based on the closing price of Washington Mutual’s stock on June 3, 2005, the implied per share purchase price is $18.71.
Joseph Saunders, Providian’s chairman and chief executive, will continue to run the credit card business and will report directly to Steve Rotella, Washington Mutual’s president and chief operating officer. Other members of Providian senior management team will also be joining Washington Mutual.
“Providian’s management has successfully developed innovative products and services, while providing superior customer support, strong underwriting and efficient operations,” said Killinger. “Retaining Providian’s leadership team helps ensure strong credit management and continuity of marketing expertise in the credit card business, while allowing Washington Mutual’s management to remain focused on the priorities we’ve set forth for the entire company. We are all committed to achieving our long-term targets, producing top-tier performance in our industry and delivering superior long-term shareholder returns.”
Saunders said, “This transaction provides Providian shareholders financially attractive terms while allowing us to take the card business to the next level. Washington Mutual’s size and resources will allow us to operate with a lower cost structure and greater efficiency than we could on our own. The compelling combination also enables us to leverage the strength of Washington Mutual’s nationally recognized brand and utilize its more than 2,000 retail stores as a new growth channel.
“Our success as an independent company is in large part due to the dedication of our employees, whose efforts have made this next step forward possible,” added Saunders. “We’re pleased that Providian and our employees will be sharing our future with Washington Mutual, a company that shares our vision and values.”
The companies noted that Providian credit card customers should expect business as usual. Their accounts, policies and payment procedures remain unchanged.
The acquisition is expected to be completed in the fourth quarter of 2005 and is subject to approval of Providian shareholders and regulatory approvals.
Lehman Brothers, Morgan Stanley, and the law firm Simpson Thacher & Bartlett advised Washington Mutual, and Goldman, Sachs & Co., Citigroup Global Markets, and the law firm of Wachtell, Lipton, Rosen & Katz advised Providian on the transaction.
Killinger and Saunders will host an analyst/investor conference call this morning, June 6, at 7:30 a.m. Pacific Time. Analysts and investors may dial in and participate in the question/answer session. To access the call, please dial 1-888-396-2384. International callers may dial 1-617-847-8711. The passcode “86950841” is required to access the call. A listen-only live broadcast of the call also will be available on the investor relations page of the company’s Website at www.wamu.com/ir.
A recording of the conference call will be available approximately one hour after the conclusion of the call at 1-888-286-8010. Callers from outside the United States may dial 1-617-801-6888. The passcode “18243170” is required to access the replay.
About Washington Mutual
With a history dating back to 1889, Washington Mutual www.wamu.com is a retailer of financial services that provides a diversified line of products and services to consumers and commercial clients. At March 31, 2005, Washington Mutual and its subsidiaries had assets of $319.70 billion. Washington Mutual currently operates more than 2,400 retail banking, mortgage lending, commercial banking and financial services offices throughout the nation. Washington Mutual’s press releases are available at [www.wamunewsroom.com].
San Francisco-based Providian [www.providian.com] is a leading provider of credit cards to mainstream American consumers throughout the United States. By combining experience, analysis and technology, Providian seeks to build long-lasting relationships with its customers by providing products and services that meet their evolving financial needs.