(By Balaseshan) Oriental Financial Group Inc. (NYSE:OFG) said it has agreed to buy Puerto Rico operations of Spain's Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) for $500 million in cash.
Oriental said it has raised $84 million of 8.75% non-cumulative convertible perpetual preferred stock, with a conversion price of $11.77, as a first step in raising an estimated $150 million in Tier 1 capital.
Based on current estimates, the acquisition would be about 35% accretive to earnings per share in 2013 on a pro forma basis and about 52% in 2014. The projected annual cost savings are expected to be about 20% of BBVA Puerto Rico's non-interest expenses, about half of which are expected to be realized in 2013.
Oriental plans to use its own excess capital to fund the balance of the purchase price. Closing of the transaction, which is subject to customary regulatory approvals, is targeted for before year end 2012.
Oriental expects to incur certain one-time restructuring charges of about $40 million in 2013 in connection with the transaction. While tangible book value per share is expected to be diluted about 23% at the close, it is anticipated to be earned back in less than two years, based on the combined company's earnings.
In addition, to reduce capital requirements and further strategic goals, Oriental intends to delever, at or prior to closing, about $1.3 billion of its investment securities portfolio and about $450 million of the BBVA Puerto Rico investment securities portfolio, including the settlement of the related repurchase agreement funding at both Oriental and BBVA Puerto Rico.
As of March 31, 2012, BBVA Puerto Rico had about $5.2 billion in assets, $3.7 billion in loans, $3.3 billion in deposits, 36 branches, and about 950 employees, which would add to Oriental's $6.5 billion in assets, $1.7 billion in loans, $2.3 billion in deposits, 28 branches and about 720 employees.
Oriental's most recent acquisition was in 2010 when it successfully purchased and integrated Eurobank's assets and liabilities in Puerto Rico from the Federal Deposit Insurance Corp.
OFG closed Wednesday's regular session up 3.26% at $10.46, while BBVA ended up 0.96% at $6.31.