Oriental Financial to Acquire BBVA's Puerto Rico Unit for $500 Million

   By Victoria Stilwell 
 

Oriental Financial Group Inc. (OFG) agreed to acquire the Puerto Rico operations of Banco Bilbao Vizcaya Arentaria SA (BBV, BBVA.MC) in a $500 million cash deal that will make Oriental the third largest bank in Puerto Rico based on assets.

BBVA Puerto Rico had about $5.2 billion in assets and about 36 branches as of March 31. The bank has franchises in commercial and corporate banking, auto lending, retail banking, residential mortgage lending, insurance and wealth management.

"For Oriental, we believe this transaction offers the best way to efficiently use our excess capital to enhance our financial performance, franchise and shareholder value," Chief Executive Jose Rafael Fernandez said. "By replacing securities and borrowings with loans and deposits, it creates a unique opportunity to transform our balance sheet and significantly improve earnings predictability."

The company said the acquisition will expand the bank's branch network and produce a more diversified loan portfolio, greater core deposit funding, and smaller investment securities portfolio.

Oriental said the deal, which is expected to close by the end of the year, would add 35% to per-share earnings in 2013 on an adjusted basis and reach about 52% in 2014. It expects to incur one-time charges of about $40 million in 2013 tied to the deal.

To fund the acquisition, Oriental said it raised $84 million of 8.75% non-cumulative convertible perpetual perferred stock in a private placement with institutional investors. The company will also use $350 million of cash on the balance sheet and $65 million to $70 million raised in equal amounts of non-convertible perpetual preferred and common stock.

Shares of Oriental closed Wednesday at $10.46 and were inactive in premarket trade. The stock is off 14% so far this year.

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