McLean-based Capital One Financial Corp. yesterday postponed its $5.3 billion purchase of Louisiana's largest bank until the damage to Hibernia Corp.'s operations could be assessed.
The firms mutually agreed to postpone final closing of the merger until Sept. 7 "as a result of the devastation and disruption caused by Hurricane Katrina." The deal had been scheduled to close today.
A spokeswoman for Capital One declined to comment further on the merger. Officials at New Orleans-based Hibernia could not be reached for comment yesterday.
Hibernia closed all of its branches in the New Orleans area, backing up data and moving some computer operations to Hibernia sites in Shreveport, La., and Houston, the bank said Monday. Government officials say it will be months before New Orleans is fully functional again.
Hibernia said Monday it had contingency plans in place to minimize disruption of services, particularly online and payment processing services.
Yet the damage to its 91 branches and back-office facilities in the New Orleans metro area could be so extensive that several analysts noted the company may have suffered a "material adverse event" under the terms of the merger contract. All major corporate merger agreements leave open the possibility of a deal being renegotiated should something unexpected occur that damages a company's value.
Todd Hagerman, a Fox-Pitt Kelton banking analyst, said he believed the merger would go forward without a renegotiation of terms.
"Certainly one could argue that it would be prudent for Capital One to take a step back and get a better assessment of the damage to the region," he said. "But it would probably be a PR nightmare [if Capital One tried to renegotiate the deal]. Going ahead with the deal provides a good opportunity for Capital One to play a significant part in the recovery of the region."
Yesterday Capital One, one of the largest credit card issuers, donated $1 million to the Red Cross disaster relief fund. The companies said they were "working together to provide coordinated relief efforts to assist Hibernia's associates, customers and the impacted communities during this difficult time."
Capital One shares closed yesterday at $82.24, up 88 cents. Hibernia was down $1.87, to $31.75.