By Victoria Stilwell
Oriental Financial Group Inc. (OFG) agreed to acquire the Puerto
Rico operations of Banco Bilbao Vizcaya Arentaria SA (BBV, BBVA.MC)
in a $500 million cash deal that will make Oriental the third
largest bank in Puerto Rico based on assets.
BBVA Puerto Rico had about $5.2 billion in assets and about 36
branches as of March 31. The bank has franchises in commercial and
corporate banking, auto lending, retail banking, residential
mortgage lending, insurance and wealth management.
"For Oriental, we believe this transaction offers the best way
to efficiently use our excess capital to enhance our financial
performance, franchise and shareholder value," Chief Executive Jose
Rafael Fernandez said. "By replacing securities and borrowings with
loans and deposits, it creates a unique opportunity to transform
our balance sheet and significantly improve earnings
predictability."
The company said the acquisition will expand the bank's branch
network and produce a more diversified loan portfolio, greater core
deposit funding, and smaller investment securities portfolio.
Oriental said the deal, which is expected to close by the end of
the year, would add 35% to per-share earnings in 2013 on an
adjusted basis and reach about 52% in 2014. It expects to incur
one-time charges of about $40 million in 2013 tied to the deal.
To fund the acquisition, Oriental said it raised $84 million of
8.75% non-cumulative convertible perpetual perferred stock in a
private placement with institutional investors. The company will
also use $350 million of cash on the balance sheet and $65 million
to $70 million raised in equal amounts of non-convertible perpetual
preferred and common stock.
Shares of Oriental closed Wednesday at $10.46 and were inactive
in premarket trade. The stock is off 14% so far this year.
Write to Victoria Stilwell at Victoria.Stilwell@dowjones.com