My new bank is now... a new bank

There were rumors this weekend that Banco Santander, the part-owner of my bank, Sovereign Bank, would acquire the whole bank, and now the news is that the rumors were correct. The press release on Sovereign's web site is entitled "Banco Santander to Acquire 75.65% of Sovereign Bancorp it Does Not Currently Own for Approximately US$1.9 billion":

October 13, 2008

Banco Santander, S.A. (NYSE: STD) and Sovereign Bancorp Inc., ("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"), announced today that Banco Santander will acquire Sovereign in a stock-for-stock transaction. Santander currently owns 24.35% of Sovereign's ordinary outstanding shares. The Capital and Finance Committee composed of independent directors of Sovereign requested that Santander consider acquiring the 75.65% of the Company it did not currently own. The Capital and Finance Committee evaluated the transaction and recommended the transaction to the full Board.

Under the terms of the definitive transaction agreement, which was approved by the Executive Committee of Santander and unanimously approved by the non-Santander directors of Sovereign, Sovereign shareholders will receive 0.2924 Banco Santander American Depository Shares (ADSs) for every 1 share of Sovereign common stock they own (or 1 Banco Santander ADS for 3.42 Sovereign shares). Based on the closing stock price for Santander ADSs on Friday, October 10, 2008, the transaction has an aggregate value of approximately US$1.9 billion (EUR 1.4 billion), or US$3.81 per share. The transaction meets Santander's criteria for acquisitions, both strategically, by significantly enhancing the geographical diversification of the Group, and financially, with a projected net profit for Sovereign of $750 million in 2011.

Juan R. Inciarte, Executive Board Member of Banco Santander, stated, "This acquisition represents an excellent opportunity for Santander and for Sovereign. We know Sovereign very well. It is a strong commercial banking franchise in one of the most prosperous and productive regions of the United States, with high growth potential, which will further diversify Banco Santander's geographical reach. We look forward to working closely with Sovereign's senior management and welcoming the entire Sovereign team to Santander."

Ralph Whitworth, Chairman of the Capital and Finance Committee of Sovereign's Board of Directors, said, "Given the unprecedented uncertainty in the current market environment and the challenges facing Sovereign, we believe this is the right transaction at the right time for Sovereign. We considered our options and this transaction very carefully and believe that it provides stability and upside potential for Sovereign, its shareholders, customers, employees and other stakeholders. We know Santander well and look forward to working with them to close this transaction."

The transaction is subject to customary closing conditions, including necessary bank regulatory approvals in the U.S. and Spain and approval by both companies' shareholders. Relational Investors, LLC has agreed to vote its 8.9% of Sovereign shares in favor of the transaction. In addition, all of the non-Santander directors have agreed to vote their shares in favor of the transaction. Banco Santander will call an Extraordinary General Meeting of the Bank's shareholders to approve a capital increase and issuance of approximately 147 million new shares, or approximately 2% of Banco Santander's capital. The transaction is expected to close in the first quarter of 2009.

About Banco Santander

Banco Santander, S.A. (SAN.MC, NYSE: STD) is the largest bank in the euro zone by market capitalization and was fifth in the world by profit in 2007. Santander engages primarily in commercial banking with complementary activities in global wholesale banking, cards, asset management and insurance. Founded in 1857, Santander had as of June, 2008, EUR 918,332 million in assets and EUR 1,050,928 million in managed funds, more than 80 million customers, 13,000 branches and a presence in some 40 countries. It is the largest financial group in Spain and Latin America. Through its Abbey subsidiary, Santander is the sixth largest bank in the United Kingdom, and is the third largest banking group in Portugal. Through Santander Consumer Finance, it also operates a leading franchise in 20 countries, with its principal focus in Europe (Germany, Italy and Spain, among others) and the U.S. In the first half of 2008, Santander registered EUR 4,730 million in net attributable profit, an increase of 22% from the previous year, excluding capital gains. For more information, see www.santander.com.

What this will mean for banking at the retail level remains to be seen, I but I would not expect a lot of change in the near future, especially before the deal closes in the first quarter of 2009. I will evaluate my own personal banking situation in a few months and then decide whether to find yet another "new" bank.

Overall, this is probably a good thing, but since the resulting bank will be larger and more stable, it could mean downwards pressure on account yields.

-- Jack Krupansky