Originally created 05/06/04

Citizens Financial Group to buy Charter One Financial

CLEVELAND -- The Royal Bank of Scotland Group is expanding its reach in North America with a $10.5 billion cash purchase of Charter One Financial Inc. through its Citizens Financial Group Inc. subsidiary.

Under the deal, announced Tuesday, the merged bank would become one of the country's 10 largest.

Citizens will grow to $128.8 billion in assets, more than 24,000 employees and more than 1,400 branches across 13 states. It will maintain its corporate headquarters in Providence, R.I.

The acquisition adds $43 billion in assets, 616 retail branches, including 160 in-store locations, and 8,400 employees.

The deal extends Citizens beyond New England and the Mid-Atlantic region into the Midwest and Northeast, adding major markets in six new states: Ohio, Michigan, New York, Illinois, Vermont and Indiana. It will also expand Citizens' business in western Massachusetts, Connecticut and Pennsylvania.

"This is a significant transaction for Citizens," Lawrence K. Fish, the company's chairman, president and chief executive, said in a statement. "However, this is not about size as we will continue to be focused locally, providing our legendary service and outstanding products in every market we serve."

The cash purchase price is $44.50 per share. The deal is expected to close in the fourth quarter.

Charter One shares closed Tuesday at $35.95, up 56 cents, on the New York Stock Exchange. After the deal was announced, the shares surged nearly 20 percent to $43.01 in after-hours trading.

The deal allows Charter One to keep its national bank charter and continue operations based in Cleveland.

John Moran, an analyst with Ryan Beck and Co. in Florham Park, N.J., said largesr bank are likely to continue the consolidation trend, particularly in the Midwest.

"We wouldn't be shocked to see other regional banks become targets," he said.

Charter One's chief executive Charles John Koch will continue to serve as chairman of the Cleveland-based bank and has been named a vice chairman of the Citizens Financial Group board, the companies said.

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