Bank of America, the country's largest domestic bank, today said it had reached an agreement to acquire credit card giant MBNA Corporation.
The deal, valued by Bank of America at about $35 billion, is a significant expansion of the company's reach in the financial services business.
Bank of America's credit card operations were significantly smaller than those of rivals Citigroup Inc., and J.P. Morgan Chase, which it may now exceed in terms of outstanding credit card balances.
Its opportunities for growth in banking per se have been limited because it already has about 10 percent of U.S. deposits, the maximum allowed.
MBNA describes itself as the largest independent credit card lender in the world.
The acquisition will add more than 20 million new customer accounts to Bank of America, bringing its total credit card business to about $143 billion in managed outstanding balances and 40 million active accounts, it said this morning.
"The result will be the country's top retailer of financial services with the size and scale to drive distribution and marketing efficiencies," said Bank of America Chairman and Chief Executive Officer Kenneth D. Lewis in a statement.
"For our shareholders," he said, the acquisition "yields a diverse business mix less dependent on market sensitive businesses," he said. "The financial strength and cash flow generation of the combined entity should provide significant resources to support future growth."
Under the agreement, expected to close in the fourth quarter of 2005, MBNA stockholders will receive 0.50 shares of Bank of America stock for each of their shares plus a cash component of about $4.12 per share. It put the value at $35 billion based on the Bank of America's share price yesterday.
Bank of America is based in Charlotte while MBNA is headquartered in Wilimington.
A statement from Bank of America said the merged company would save about $850 million after tax, in part from a reduction of 6000 jobs and elimination of overlapping technology and marketing expenses.
Bruce L. Hammonds, CEO and president of MBNA, will become CEO and president of Bank of America Card Services.
The directors of both companies have approved the deal, which must also pass regulatory and shareholder muster.
North Carolina based Wachovia Corp. has also talked recently of buying back into the credit card business, after selling its own to MBNA in 2000.
Analysts had speculated that Wachovia might attempt to buy MBNA or Discover.