National City Corp., the Cleveland-based bank being acquired by PNC Financial Services Group Inc., agreed to release more data and pay $1.2 million in legal fees to settle lawsuits challenging the fairness of the deal.
In one of eight Delaware Chancery Court lawsuits, shareholder Arthur Klein alleged Oct. 27 that National City directors were duty-bound to get a higher price. A hearing to block the transaction had been scheduled for yesterday.
"Counsel for the parties have concluded that a settlement" on the claims "is fair, reasonable and adequate and in the best interests" of National City stockholders, lawyers said in court papers filed in Wilmington Dec. 12.
Pittsburgh-based PNC said Oct. 24 it would buy National City, Ohio's largest bank, for $5.2 billion to create the eighth-largest U.S. bank by assets, after receiving $7.7 billion in funding from the U.S. Treasury.
Under the buyout agreement, National City investors will receive 0.0392 share of PNC common stock for each of their shares, according to court papers. National City shareholders will vote on the deal Dec. 23.
In a memorandum of understanding filed with the court, National City officials denied wrongdoing and agreed to pay the legal fees and expenses for plaintiffs' lawyers.
They also disclosed information about the buyout process, including a planned $25 million transaction fee to be paid by National City for work by Goldman Sachs Group Inc. and $56 million paid by PNC to Citigroup affiliates related to the merger.
The settlement terms must be presented to Judge William B. Chandler III for approval at a later hearing.
The buyout plan won approval from the U.S. Federal Reserve yesterday and may close by the end of the year.
National City joined Wachovia Corp. and Washington Mutual Inc. in takeovers after losses tied to subprime-mortgage loans. National City was once among the nation's top 10 subprime lenders. Its stock price has fallen 88 percent this year.
National City rose 20 cents to $1.93 at 4 p.m. in New York Stock Exchange composite trading. Pittsburgh-based PNC rose $3.20, or 7 percent, to $49.20.
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