Capital One buys Hibernia Corp for $7.3 billion

NEW YORK - Capital One Financial Corp, the fifth-biggest US credit-card issuer, said it agreed to buy Hibernia Corp for US$5.35 billion ($7.3 billion) in stock and cash to add a network of bank branches.

Capital One, based in McLean, Virginia, will pay US$33 a share for Hibernia, said Richard Woods, a Capital One spokesman.

Shareholders of Hibernia, a New Orleans-based lender with 314 locations in Louisiana and Texas, will get 45 per cent of that amount in cash and 55 per cent in Capital One stock.

Shares of Hibernia, Louisiana's biggest bank, rose 39 cents, or 1.5 per cent, to US$26.57 in New York Stock Exchange composite trading on Friday.

The acquisition will extend Capital One chief executive Richard Fairbank's push beyond credit cards.

In the past year, Fairbank, who was 53 as of March last year, bought US and UK home-equity lenders and a car-financing business in California.

"I would assume they want to get into commercial and industrial lending, and that they feel the credit-card industry has maxed out in terms of growth," said Richard Bove, an analyst at Punk Ziegel & Co in Pinellas Park, Florida, who doesn't rate Capital One shares.

"It may be that Capital One feels it needs to offer a wider product array."

The agreement was reported earlier by the Wall Street Journal.

Capital One aims to become "a full-service financial company", and Hibernia's network of branches in Louisiana and Texas will help the lender increase its deposits, Woods, the Capital One spokesman says.

"Hibernia has done well in Texas, and they're very strong in Louisiana," he said.

Hibernia CEO Herb Boydstun, 58, will remain with the combined company as president of the Hibernia unit, he said. Capital One and Hibernia's boards approved the transaction yesterday, Woods said.

Hibernia bought Coastal Bancorp last year to bolster its presence in Texas, and opened 12 new branches in Dallas, Fort Worth and Houston.

- BLOOMBERG