NEW YORK (Reuters) - Fifth Third Bancorp Inc. (FITB.O), a large U.S. bank that operates mainly in the Midwest, said on Monday it agreed to buy the Crown Bank franchise from Puerto Rico’s R&G Financial Corp. RGFC.PK for $288 million to expand in Florida.
The purchase will add 30 branches in the state, giving Fifth Third roughly 130, and three in Augusta, Georgia. Crown has about $3 billion of assets.
Kevin Kabat, who became Fifth Third’s chief executive last month, called the transaction “an opportunity to expand our presence in some very attractive markets.”
Fifth Third will also pay an R&G affiliate $16 million for some real estate, and assume $50 million of trust preferred securities.
R&G shares rose as much as 16.5 percent after the San Juan-based company, which has struggled with accounting problems, said the transaction would improve liquidity.
Cincinnati-based Fifth Third entered Florida in 2005 when it paid $1.5 billion for First National Bankshares of Florida.
It expects the purchase of Casselberry, Florida-based Crown to boost its deposit market share to fifth from ninth in the Tampa area and to seventh from 10th in Orlando, and to help it enter the Jacksonville area ranked ninth. Florida would generate 9 percent of earnings, up from 6.5 percent.
“We expect Fifth Third to expand further in both Jacksonville and Georgia,” Lehman Brothers Inc. analyst Jason Goldberg wrote.
Another Ohio bank, Cleveland’s National City Corp. NCC.N, spent $2.1 billion on two Florida banks within the last year.
Fifth Third has about $99.8 billion of assets and operates 1,161 branches in 10 states. Separately, it authorized the buyback of up to 30 million, or 5.5 percent, of its shares.
Fifth Third expects the transaction to close in the fourth quarter, conditioned in part on the lifting of a March 2006 Federal Reserve governing Crown’s activities. It sees up to $30 million of merger-related charges, and expects $15 million in after-tax savings over two years.
The bank expects the purchase to reduce fourth-quarter earnings per share by a penny, and boost earnings per share starting in 2009, according to slides accompanying the announcement. It said the price values Crown at 0.87 times book value and 1.56 times tangible book value.
Keefe, Bruyette & Woods and the law firm Patton Boggs LLP advised R&G. The law firm Graydon, Head & Ritchey LLP advised Fifth Third.
R&G shares rose 60 cents, or 15.6 percent, to $4.45 in afternoon trading on the Pink Sheets, after rising to $4.60. Fifth Third shares rose 20 cents to $41.36 on the Nasdaq.
Additional reporting by Amitha Rajan in Bangalore