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October 14, 2008 12:17 PM

Banco Santander's $1.9 Billion Buy of Sovereign Reflects New Reality

Posted by Zach Lowe

Back in the halcyon days of 2005, Banco Santander purchased about 25 percent of Pennsylvania-based Sovereign Bancorp. Inc. for $2.9 billion. The companies agreed that if Santander wanted more of Sovereign, the Spanish bank would have to pay at least $40 per share, according to filings with the SEC.

So much for that. Late Monday, Santander, repped by Davis, Polk & Wardwell, acquired the remaining 75 percent of Sovereign for $1.9 billion--or about $3.81 per share, according to a statement.

The credit crisis has battered Sovereign, Bloomberg reports, and the bank obviously knew it had to waive the $40 requirement to draw any suitors.

A team from Milbank, Tweed, Hadley & McCloy represented Sovereign.

Santander plans to issue 147 million new shares in order to pay for the deal without any aid from the U.S. government, Bloomberg says. The deal gives Santander its first major foothold in the U.S. market and comes after Santander already scooped up Alliance & Leicester and part of Bradford & Bingley, two U.K. banks suffering amid the credit crisis.

Partners Diane Kerr and Joseph Rinaldi led the Davis Polk corporate team. Other partners on the deal include regulatory partner Arthur Long, employee benefits partner Edmond FitzGerald, tax partner Michael Mollerus, and environmental partner Gail Flesher.

Partner Thomas Janson led the Milbank team along with corporate M&A partner Roland Hlawaty. Other partners on the transaction include tax and benefits partners Russell Kestenbaum, Paul Wessel, and Joel Krasnow, securities partner Douglas Tanner, and special regulatory partner Winthrop Brown.

The deal is expected to close in the first quarter of 2009.

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