Not cheap

5 May 2004 By Rob Cox Follow @rob1cox

Who says the Scots are tight fisted? Royal Bank is paying 3.2 times book for a former thrift that just a decade ago nearly went bust. Even with mooted synergies, the deal looks a tad too juicy. Shareholders ought to hope Fred Goodwin is underpromising on cost cuts again.

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Royal Bank of Scotland's Citizens Financial Group said it will acquire Charter One Financial, an Ohiobased US bank, for $10.5n in cash.

The acquisition adds $43bn in assets, 616 retail branches and 8,400 employees. With this deal, Citizen's becomes one of the top 10 US banks with a franchise that extends from New England and the MidAtlantic into the Midwest and has $129bn of assets.

Royal Bank is paying $44.50 a share in cash. Lehman Brothers advised Charter One and Merrill Lynch and Goldman Sachs represented Royal Bank.

Fred Goodwin, RBS Group Chief Executive, said: "This is a highly logical and very natural acquisition for Citizens to make. As well as making good financial sense in its own right, it opens up another interesting range of options for Citizens to maintain their strong growth momentum, and it consolidates Citizens' position as one of the leading banks in the United States. That it will take the share of Group profits generated in the US to 25% is also of note."

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