August 16, 2007 / 12:17 PM / 10 years ago

Fifth Third to buy First Charter

<p>The logo of Fifth Third Bank is seen in this undated handout photo. Fifth Third Bancorp &lt;FITB.O&gt; said on Thursday that it would buy First Charter Corp. &lt;FCTR.O&gt; for $1.1 billion to gain access to nearly 60 bank branches in the U.S. South.Handout</p>

NEW YORK (Reuters) - Fifth Third Bancorp (FITB.O), a large U.S. Midwest bank, said on Thursday it would buy First Charter Corp. FCTR.O for about $1.1 billion, adding nearly 60 bank branches in North Carolina and Georgia.

The transaction is a sign that deals can still get done amid a global credit squeeze and merger slowdown. The volume of U.S. deals last week was the third-lowest of 2007.

Cincinnati-based Fifth Third said it would pay $31 in cash and stock for each First Charter share, a 53 percent premium over the shares' Wednesday closing price on Nasdaq.

Based in Charlotte, North Carolina, First Charter operates 57 branches in its home state and two in suburban Atlanta. That will give Fifth Third further entry into a fast-growth market and an additional $4.9 billion in assets.

"This furthers our penetration into fast-growing southeastern metropolitan markets at a reasonable price," said Kevin Kabat, chief executive of Fifth Third.

In May, Fifth Third said it would buy the Crown Bank franchise from Puerto Rico's R&G Financial Corp. RGFC.PK for $288 million to expand in Florida. Fifth Third entered Florida in 2005 when it bought First National Bankshares for $1.5 billion.

The First Charter deal, expected to close in the 2008 first quarter, will reduce Fifth Third's earnings per share by about 2 percent next year, and will be neutral to earnings in 2009, Fifth Third said.

The purchase price for First Charter represents a multiple of about 2.4 times its book value and a core deposit premium of about 32 percent, Fifth Third said.

Fifth Third said it expects the acquisition to generate $35 million a year in pre-tax savings, phased in over two years. But there will be a one-time pre-tax charge of $61 million for staff training and retention, severance pay and other items.

Fifth Third shares were off $1.38, or 3.7 percent, to $36.00 in midday trade on the Nasdaq. First Charter shares were up $7.67, or 38 percent, to $27.92, also on the Nasdaq.

Fifth Third said it was advised on the deal by former Bank of America Corp. (BAC.N) Chairman Hugh McColl Jr. and Goldman Sachs (GS.N).

Reporting by Tim McLaughlin and Mark McSherry

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