Hibernia Corp. shareholders approved a merger with McLean credit card company Capital One Financial Corp. yesterday, the last hurdle in Capital One's efforts to take over the largest independent bank in storm-ravaged New Orleans.
The merger, part of Capital One's long-term plan to diversify from its heavy reliance on the credit card business, began with a March agreement to pay about $5.5 billion in cash and stock for Hibernia. But after Hurricane Katrina inundated 80 percent of the city in September and shut down most of Hibernia's branches there for weeks, the two companies agreed to lower the price. The final price is expected to be about $5 billion, roughly 8 percent less than the original terms.
Hibernia said 97 percent of the shares voting yesterday, representing 57 percent of the total shares outstanding, voted in favor of the merger.
Hibernia is New Orleans's biggest bank and is expected to play a large role in the recovery of the city. In recent weeks, it initiated several loan programs to help businesses and consumers rebuild. On Oct. 31, the company's executives and staff moved back into its iconic headquarters building in downtown New Orleans after a month of repairs to the structure. Hibernia installed gas-powered generators on Sept. 15, when most of the city still lacked electricity, to illuminate the white cupola atop the 22-story structure.
Hibernia last month said that total costs associated with the hurricane were $197.7 million, leading to a $58.1 million loss in the third quarter. The costs included $175 million in estimated loan losses, $11.5 million in business disruption costs, property damage of $34 million (about $25 million of which was insured), and $2 million in other expenses such as employee assistance programs. The third-quarter loss was also increased by the suspension of a variety of fees and service charges to customers during the disaster.