Capital One to Acquire ING Direct for $9.0 Billion

Capital One Financial Corporation (NYSE: COF) announced today a definitive agreement under which Capital One will acquire ING Direct from ING Groep in a stock and cash transaction valued at $9.0 billion.

Currently the 8th largest bank in the United States, based on deposits, Capital One’s acquisition of ING Direct combines ING Direct’s valuable national direct deposit franchise with Capital One’s advantaged access to assets and local scale branch banking. The combination strengthens Capital One’s customer franchise and brand and provides significant financial and strategic upside with low execution risk. Upon closing, Capital One will become the 5th largest depository institution and the leading direct bank in the United States.

Under the agreement, Capital One will purchase ING Direct from ING Groep for $6.2 billion in cash and approximately 55.9 million Capital One shares, valued at $2.8 billion, based on a Capital One share price of $50.07, the 10-day average of Capital One closing prices for the period ending June 15, 2011. Capital One expects this transaction will be accretive to tangible book value at closing, accretive to EPS in 2012 and result in mid-single digit accretion in 2013.

Capital One expects to finance the cash portion of the consideration, in part, through a public equity raise of approximately $2 billion and debt offerings of approximately $3.7 billion prior to the close of the transaction.

“The acquisition of ING Direct is a game-changing transaction that delivers attractive deal economics immediately and compelling long-term strategic value,” said Richard D. Fairbank, Chairman and Chief Executive Officer of Capital One. “The combination of Capital One and ING Direct creates a unique and valuable banking franchise that includes advantaged access to assets, great local scale branch banking in attractive markets, and with ING Direct, the leading direct bank customer franchise with national reach. Adding ING Direct enhances and sustains key sources of shareholder value over the long-term, including growth, returns and capital generation.”

Capital One will work closely with ING Direct’s leadership team to establish a management structure designed to ensure that the combined company achieves the highest quality integration and has the best leadership in place to build on ING Direct’s great customer franchise.

In connection with the transaction, Capital One expects to realize $90 million from consolidating systems, platforms and corporate staff functions. In addition to these cost synergies, Capital One expects to achieve funding savings of $200 million annually from optimizing management of the combined deposit portfolio. Beyond these amounts, there are potential additional synergies from cross-selling the ShareBuilder online brokerage products to Capital One customers and select Capital One products to ING Direct customers, and from balance sheet repositioning opportunities. The company will incur $210 million of merger and integration costs in connection with the acquisition.

“ING Direct is a tremendous franchise,” Fairbank added. “Its innovative platform and customer-focus are well aligned with Capital One’s own vision. We are committed to sustaining and enhancing the great customer relationships that have been central to the success of both banks.”

In connection with ING Groep’s 9.9 percent pro forma ownership stake in Capital One, ING Groep will have the right to name one member to the company’s Board of Directors and has agreed to a customary lock-up on its shares. The transaction is subject to customary regulatory approvals, including banking approvals in both the U.S. and The Netherlands, and is expected to close in late 2011 or early in 2012.

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