Manufacturers Hanover Corp., the nation's fourth largest banking concern, today announced plans to purchase C.I.T. Financial Corp. from RCA Corp. for $1.51 billion, the largest acquisition by a bank holding company in history.
The deal is designed to help Manufacturers Hanover position itself in the financial services industry for the widely expected changes in federal bank laws permitting broader interstate banking.
The New York bank company already is heavily involved in the leasing business, with a $5 billion portfolio in that field, and is a major consumer finance company with receivables of more than $1 billion and 381 offices. C.I.T., with 350 offices, had assets as of mid-year of $6.2 billion and receivables of about $7.3 billion.
Manufacturers Hanover Chairman John F. McGillicuddy said the purchase "complements rather than duplicates our own traditional strengths."
But several analysts immediately questioned the bank's wisdom in purchasing a finance company with shrinking assets and questionable prospects and said the sale is an admission of RCA's failure to become a major force in the finance business since it completed the purchase of C.I.T. just 3 1/2 years ago.
From RCA's point of view, however, the deal fits neatly, if belatedly, with Chairman Thornton Bradshaw's continuing two-year struggle to move RCA's focus from that of a diversified holding company to one devoted to the company's core communications businesses. Although C.I.T. has not been on the block, largely because company officials did not think it could bring an adequate purchase price, RCA only recently abandoned efforts to sell the Hertz Corp.
The sale "gives us considerable financial flexibility," Bradshaw said in an interview today. "Now, many areas can be considered for acquisition and there are opportunities we now have within RCA for large expenditures." The transaction will permit RCA to pay off all its short-term debt, he said.
The deal does not include C.I.T.'s insurance subsidiaries, which Manufacturers Hanover is precluded from buying under federal banking law.
Under terms of the preliminary agreement, the bank holding company will pay RCA $460 million in cash, $250 million in convertible and adjustable preferred stock, and $800 million in eight-year senior notes.