On December 2, 2015, Vantiv, Inc. (NYSE: VNTV) conducted a
secondary offering of 13.4 million shares of its Class A Common
Stock on behalf of Fifth Third (Nasdaq: FITB). The offering was the
culmination of a three-step process detailed below that included 1)
the partial cancellation of the warrant held by Fifth Third to
purchase additional ownership in Vantiv Holding, LLC for a $200
million cash payment; 2) the net exercise of a portion of the
remaining warrant for 5.4 million Class C units; and 3) the
exchange of these 5.4 million Class C units and 8 million Class B
units for the 13.4 million shares of Vantiv, Inc. Class A Common
Stock included in the secondary offering. Each of these
transactions is more fully described below.
During the fourth quarter, Fifth Third expects to recognize a
pre-tax gain of approximately $419 million (approximately $273
million after tax) related to the ownership interests included in
these transactions.
These transactions are in line with Fifth Third’s goal of
monetizing the remaining portion of its stake in Vantiv over
time.
Partial cancellation and net exercise of the warrant
Fifth Third agreed to cancel rights to purchase approximately
4.8 million Class C units in Vantiv Holding, LLC, the wholly-owned
principal operating subsidiary of Vantiv, Inc., underlying the
warrant (or approximately 24% of the original warrant units) in
exchange for a cash payment of $200 million.
Subsequent to this cancellation, Fifth Third exercised its right
to purchase approximately 7.8 million Class C units underlying the
warrant (or approximately 38% of the original warrant units) at the
$15.98 strike price. This exercise was settled on a net basis for
approximately 5.4 million Class C units, which were then exchanged
for approximately 5.4 million shares of Vantiv Inc. Class A Common
Stock that were sold in the secondary offering.
Fifth Third expects to recognize a pre-tax gain of approximately
$89 million (approximately $58 million after tax) on the 62% of the
warrant that was settled or net exercised. This does not include
any mark-to-market gains or losses on the remaining warrant
position that will be recorded at the end of the quarter.
After these transactions, Fifth Third will continue to have the
right to purchase approximately 7.8 million Class C units in Vantiv
Holding, LLC that are exchangeable on a one-for-one basis for
Vantiv Inc. Class A common stock. The remaining warrant position
will continue to be marked to fair value on a quarterly basis
through Fifth Third’s income statement.
Class B unit sale
Fifth Third exchanged 8 million Class B units of Vantiv Holding,
LLC for 8 million Class A shares in Vantiv Inc., which were also
sold in the secondary offering, and on which Fifth Third expects to
recognize a pre-tax gain of approximately $330 million
(approximately $215 million after-tax). Fifth Third’s share in
Vantiv’s earnings will continue to be accounted for under the
equity method and will reflect the reduced ownership position.
Under its current capital plan for which we received a
non-objection from the Federal Reserve in March 2015, Fifth Third
may repurchase shares of Fifth Third common stock in an amount up
to any after-tax gains realized from the sale of Vantiv Class B
units.
Upon the completion of the foregoing transactions, Fifth Third
will beneficially own approximately 18.3% of Vantiv’s equity
through its ownership of approximately 35 million Class B units of
Vantiv Holding, LLC. In addition, Fifth Third will no longer have
consent rights that require its approval for certain significant
matters related to Vantiv, Inc. and/or its subsidiaries.
Forward Looking Statements
This release contains statements that we believe are
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Rule 175 promulgated
thereunder, and Section 21E of the Securities Exchange Act of 1934,
as amended, and Rule 3b-6 promulgated thereunder. These statements
relate to our financial condition, results of operations, plans,
objectives, future performance or business. They usually can be
identified by the use of forward-looking language such as “will
likely result,” “may,” “are expected to,” “anticipates,”
“potential,” “estimate,” “forecast,” “projected,” “intends to,” or
may include other similar words or phrases such as “believes,”
“plans,” “trend,” “objective,” “continue,” “remain,” or similar
expressions, or future or conditional verbs such as “will,”
“would,” “should,” “could,” “might,” “can,” or similar verbs. You
should not place undue reliance on these statements, as they are
subject to risks and uncertainties, including but not limited to
the risk factors set forth in our most recent Annual Report on Form
10-K as updated from time to time by our Quarterly Reports on Form
10-Q. When considering these forward-looking statements, you should
keep in mind these risks and uncertainties, as well as any
cautionary statements we may make. Moreover, you should treat these
statements as speaking only as of the date they are made and based
only on information then actually known to us. There is a risk that
additional information may arise during the company’s close process
or as a result of subsequent events that would require the company
to make adjustments to the financial information contained
herein.
There are a number of important factors that could cause future
results to differ materially from historical performance and these
forward-looking statements. Factors that might cause such a
difference include, but are not limited to: (1) general economic
conditions and weakening in the economy, specifically the real
estate market, either nationally or in the states in which Fifth
Third, one or more acquired entities and/or the combined company do
business, are less favorable than expected; (2) deteriorating
credit quality; (3) political developments, wars or other
hostilities may disrupt or increase volatility in securities
markets or other economic conditions; (4) changes in the interest
rate environment reduce interest margins; (5) prepayment speeds,
loan origination and sale volumes, charge-offs and loan loss
provisions; (6) Fifth Third’s ability to maintain required capital
levels and adequate sources of funding and liquidity; (7)
maintaining capital requirements and adequate sources of funding
and liquidity may limit Fifth Third’s operations and potential
growth; (8) changes and trends in capital markets; (9) problems
encountered by larger or similar financial institutions may
adversely affect the banking industry and/or Fifth Third; (10)
competitive pressures among depository institutions increase
significantly; (11) effects of critical accounting policies and
judgments; (12) changes in accounting policies or procedures as may
be required by the Financial Accounting Standards Board (FASB) or
other regulatory agencies; (13) legislative or regulatory changes
or actions, or significant litigation, adversely affect Fifth
Third, one or more acquired entities and/or the combined company or
the businesses in which Fifth Third, one or more acquired entities
and/or the combined company are engaged, including the Dodd-Frank
Wall Street Reform and Consumer Protection Act; (14) ability to
maintain favorable ratings from rating agencies; (15) fluctuation
of Fifth Third’s stock price; (16) ability to attract and retain
key personnel; (17) ability to receive dividends from its
subsidiaries; (18) potentially dilutive effect of future
acquisitions on current shareholders’ ownership of Fifth Third;
(19) effects of accounting or financial results of one or more
acquired entities; (20) difficulties from Fifth Third’s investment
in, relationship with, and nature of the operations of Vantiv, LLC;
(21) loss of income from any sale or potential sale of businesses
that could have an adverse effect on Fifth Third’s earnings and
future growth; (22) difficulties in separating the operations of
any branches or other assets divested; (23) inability to achieve
expected benefits from branch consolidations and planned sales
within desired timeframes, if at all; (24) ability to secure
confidential information and deliver products and services through
the use of computer systems and telecommunications networks; and
(25) the impact of reputational risk created by these developments
on such matters as business generation and retention, funding and
liquidity.
You should refer to our periodic and current reports filed with
the Securities and Exchange Commission, or “SEC,” for further
information on other factors, which could cause actual results to
be significantly different from those expressed or implied by these
forward-looking statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20151203005626/en/
For Fifth Third BancorpInvestorsJim Eglsede,
513-534-8424orMediaLarry Magnesen,
513-534-8055
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