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Capital One Financial to acquire Chevy Chase Bank

5th December 2008
By Staff Writer

Capital One Financial and Chevy Chase Bank have announced a definitive agreement under which Capital One will acquire Chevy Chase in a cash and stock transaction valued at approximately $520 million. Both the banks are based in the US.

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Under the agreement, Capital One will purchase Chevy Chase for $445 million in cash and 2.56 million Capital One shares, valued at $75 million. Capital One expects this transaction will be accretive to operating EPS in 2009 and accretive to GAAP EPS in 2010. Capital One will take a net credit mark of $1.75 billion for potential losses in Chevy Chase's loan portfolio.

The combined company will have deposits of more than $110 billion, a managed loan portfolio of more than $159 billion, and 983 branches. The transaction is subject to customary regulatory approval and is expected to close in the first quarter of 2009. Capital One expects the transaction to produce an internal rate of return in excess of 13% and be accretive to operating EPS in 2009 and accretive to GAAP EPS in 2010.

Richard Fairbank, chairman and CEO of Capital One, said: "Chevy Chase is a great strategic fit for Capital One and the combination of our two banks is economically compelling. Chevy Chase provides an opportunity to acquire a well-run retail bank with local scale in one of the best local banking markets in the US. This transaction will enhance our strong deposit base, providing us with greater scope and scale in key Mid-Atlantic banking markets."

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