Cap One to buy Hibernia Bank

The venerable Louisiana bank, Hibernia Corp., has agreed to be acquired by McLean, Va.-based Capital One Finance Corp. in a $5.35 billion deal that allows one of the nation’s leading credit card issuers finally to enter the retail banking industry. With a market value of approximately $20 billion, Cap One is nearly five times Hibernia’s size.
Hibernia is a Louisiana institution that established in the post-Civil War years. It became best known during the Great Depression, when the late Louisiana Governor and demagogue Huey Long leaned on Hibernia and other banks to finance huge public works projects for the construction of bridges, roads and other infrastructure in Louisiana during the 1930s. Hibernia has more about $22 billion in assets, about 300 branches and operations in Texas, Louisiana and Mississippi.
Cap One’s acquisition is a clear response to a shrinking market share in the credit card business, where competitors such as Bank of America Corp. have invested billions in new products over the past several years. That’s why your and my teenage children continue to receive so many solicitations for credit cards in the mail. Acquiring a retail bank will give Cap One low-cost retail deposits, which it can then use to generate loans at more profitable interest rates to its borrowers.
Hibernia’s banking operation will will fit nicely into Cap One’s business, which also provides financial services such as health insurance and personal loans. Cap One was also attracted to Hibernia’s presence in the Texas banking market, which is growing much faster than Louisiana’s market. The deal is is expected to close by the third quarter of this year. Hibernia shareholders will receive $33 for each of their shares, split into roughly half cash and half Cap One stock, which means that Hibernia stockholders will receive about a 24% premium on their shares’ $26.57 price on the New York Stock Exchange as of this past Friday.

Leave a Reply