Washington Mutual Inc. said Monday that it agreed to acquire Providian Financial Corp. for about $6.45 billion in cash and stock in a deal that will combine two financial services companies focused on serving middle market consumers.
Providian, which will remain based in San Francisco, will become a business unit of Washington Mutual, which plans to retain the company’s management team and infrastructure.
Kerry Killinger, chairman and chief executive of Washington Mutual, said the deal will enhance his company’s consumer banking growth and diversify its balance sheet with high-yielding credit card assets .
“Providian is a highly profitable business with solid credit quality. Its focus on middle market consumers makes Providian a natural fit for our business and a winning combination for both companies’ customers,” he said.
Based on Washington Mutual’s Friday closing price, the purchase is valued at $18.71 per share, the company said, but the stock portion of the deal will depend on its average closing price for 10 days before the transaction is closed.
That would be a 4.2 percent premium over Providian’s closing price of $17.96 on Friday. Its shares have traded in a range of $12.93 to $18.28 over the past 52 weeks.
Under the agreement, Providian shareholders will receive stock and cash based on an exchange ratio of 0.45 Washington Mutual shares for each Providian share, with 89 percent of the price paid in Washington Mutual stock and 11 percent in cash.
Washington Mutual expects the transaction, which is subject to Providian shareholder and regulatory approval, to close in the fourth quarter and boost earnings within a year. Analysts surveyed by Thomson Financial expected Washington Mutual to earn $3.95 per share for 2006 before the deal was announced.