Over the last several weeks, Spain's Banco Santander SA has been linked in merger talks with several American banks such as Washington Mutual Inc. and Wachovia Corp. The Madrid-based bank fell short of those two targets. Now, Santander is reportedly close to acquiring a familiar face in the form of Sovereign Bancorp Inc. of Philadephia.
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If a deal is consummated, Santander - which already owns a 24.9% of Sovereign - would likely pay close to $2.53 billion for the rest of the bank. The amount is based on shares outstanding as of July 21 and Friday's market close of $3.81 per share. The last year has been a rocky road for Sovereign as its shares have fallen 77% due to mortgage and home-equity losses in areas it expanded in such as the southwestern and southeastern U.S.
For Santander, the deal would certainly give it a bigger presence it sorely lacks in the U.S. The acquisition would also be a logical fit because it would allow Santander to strengthen the financial footing of Sovereign, limiting the chance it won't lose its original investment in the Philadelphia bank. Santander acquired an initial 19.8% stake in Sovereign in October 2005 for $2.4 billion. The Spanish bank later expanded its holding to a 24.9% stake. The deal allowed Sovereign to turn around and acquire Brooklyn, N.Y.-based Independence Community Bank Corp. for $3.6 billion. - Gerald Magpily
