SNL Financial Says Bank Megamergers Fuels Growth In Deal Value; Deal Volume Down Across All Sectors

Absent the JP Morgan/BankOne merger, bank deal value dropped to $23.6 billion in the first quarter

CHARLOTTESVILLE, VA. -- The increase in first-quarter deal value in the financial services sector resulted almost entirely from the megamerger between J.P. Morgan Chase & Co. (NYSE: JPM) and Bank One Corporation (NYSE: ONE), while both deal value and volume — excluding the JPM/ONE deal — declined across all sectors, according to SNL Financial.

Banking M&A deals announced during the period totaled 62, slightly fewer than the prior quarter's 71, but higher than the year-ago period’s 52. Excluding the JPM/ONE transaction, bank deal value slipped 58.8% to $23.6 billion from the fourth quarter, though still up from $5.4 billion in the year-ago quarter. Including the JPM/ONE transaction, total deal value increased for the second sequential quarter, climbing to $82.3 billion from $57.3 billion in the previous quarter.

The JPM/ONE transaction punctuated merger activity for the period and ranks as the third-largest banking deal in history, with a value of $58.7 billion. The deal was priced at 285.43% of tangible book at announcement.

The second-largest transaction of the period was North Fork Bancorp’s (NYSE: NFB) acquisition of GreenPoint Financial Corp. (NYSE: GPT). Coming close on the heels of North Fork’s acquisition of Trust Company of New Jersey (NASDAQ: TCNJ), last quarter, this latest deal moves North Fork up to fifth place in the NY-NJ-PA-CT Fed market, based on deposits. Consolidation in the South provided the third-largest transaction of the quarter with the merger of equals between Regions Financial Corp. (NYSE: RF) and Union Planters Corp. (NYSE: UPC).

At announcement, offers averaged 225.9% of book compared to 218.9% in the previous quarter and 198.99% in the year-ago period. On a price to earnings basis, deals posted a median 24.00x, compared with 26.49x in the previous quarter and 22.14x in the year-ago period.

First quarter’s Insurance M&A deal value dropped 92.3% to $2.9 billion while there were 76 deals announced in the first quarter of 2004 down from 86 in the fourth quarter . A mong the largest deals announced during the period was Swiss Reinsurance unit Swiss Re Life & Health America’s $690 million acquisition of the individual life insurance business of CNA Financial Corp. (NYSE: CNA), a unit of Loews Corp. This was surpassed only by the $1.35 billion acquisition of Safeco Life and Investments by an investor group led by White Mountains Insurance Group (NYSE:WTM) and Berkshire Hathaway (NYSE:BRK.A).

Securities and investments M&A deals declined in number to 21 from 31 in the last quarter of 2003. Total reported deal value plummeted to $38.2 million from $2.69 billion in the prior quarter. Early in the quarter, U.S. firms Legg Mason (NYSE: LM) and Zions Bancorporation (NASDAQ: ZION) announced deals for foreign operations of Rothschild North America and Van Der Moolen Holding NV, respectively.

Specialty finance M&A deal volume declined slightly to 21 from 23 deals in the prior quarter, which had tallied the highest number of deals in the previous four quarters. Deal value experienced a significant decline in the new year, dropping to $1.9 billion from $4.7 billion. During the quarter, MBNA Corp. (NYSE: KRB) completed its announced acquisition of Sky Financial Solutions, the dental financing unit of Sky Financial Group (NASDAQ: SKYF). In one of the more notable deals, fulfilling rumors that foreign banks were interested in acquiring U.S. financial assets, Royal Bank of Scotland Group acquired the credit card operations of People’s Bank (MHC). People’s received a 15.5% premium on the credit card portfolio.

About SNL Financial

SNL collects, standardizes and disseminates all relevant corporate, financial, market, and M&A data — plus news and analysis — for the Banking, Financial Services, Insurance, Real Estate, Energy and Media & Communications industries. For more information, visit www.SNL.com.