Citigroup Inc., the largest U.S. financial services company, said Monday it agreed to buy European American Bank from Dutch banking company ABN Amro Holding for $1.6 billion in cash to gain more branches in the New York area.
The purchase will give Citigroup a boost in its rivalry with J.P. Morgan Chase & Co., which has the largest market share in New York City. Citigroup said it has 96 branches in the area.
Based in Uniondale, Long Island, EAB has $15.4 billion in assets, $11.5 billion in deposits and 97 branches in New York City and Long Island.
Citibank, the banking arm of New York-based Citigroup, has assets of more than $792 billion. The purchase of EAB, which also includes the assumption of $350 million in EAB preferred stock, will greatly expand Citibank's reach into suburban areas.
Citigroup said the acquisition will add "a few cents" to its earnings per share in the first year after completion, which is expected midyear.
The company said it plans to close some branches after completing the deal. Marge Magner, head of Citigroup's domestic retail operations, said branch employees won't lose their jobs, although job cuts are expected in other areas.
The acquisition, which is subject to regulatory approval, is the latest in a series for Citigroup.
Early last year, the company paid $2.2 billion to acquire Schroder's investment banking division in London, which was combined with the European operations of its Salomon Smith Barney brokerage unit.
Then in December, Citigroup completed the $31.1-billion purchase of Associates First Capital Corp. Purchase of the sub-prime lender was approved by bank regulators after Citigroup pledged to strengthen its consumer safeguards, especially for home equity loans.
ABN Amro formally began soliciting bids for the regional bank unit at the end of January. FleetBoston Financial Corp., the nation's seventh-largest bank, and North Fork Bancorp Inc. were both seen as front-runners in the bidding process.
ABN Amro will use the proceeds to pay for part of its $2.75-billion purchase of Chicago-based Michigan National Corp., Bloomberg News said. The largest Dutch bank has been sharpening its retail-banking strategy to focus on markets where it has a substantial market share.
In the U.S. it's expanding in the Midwest, where it also owns Standard Federal Bank of Troy, Mich., and Chicago-based LaSalle Bank. EAB was too small to compete with Goliaths such as Chase Manhattan and Citibank.
The Amsterdam-based bank joins other European companies backtracking from the New York market. London-based National Westminster Bank sold its network of 900 branches in New York and New Jersey in 1995 to what is now FleetBoston Financial Corp.
Bank of New York Co. bought Barclays' 62 branches in the New York metropolitan area eight years ago for about $150 million.