PNC Bank has announced plans to acquire National City for $2.23 per share, or about $5.2 billion in PNC stock. FAIL for National City, but WIN for PNC. Why?

• PNC is not expending cash, just issuing stock.
• The acquisition helps PNC shore up their deposits. Their base will be $180 billion – now the fifth largest in the nation.

National City was trading around 25 at the start of the year. That is an over 90% haircut.

More details from the press release:

PNC plans to issue to the U.S. Treasury $7.7 billion of preferred stock and related warrants under the TARP Capital Purchase Program subject to standard closing requirements. The U.S. Treasury Department approval of PNC’s participation enables PNC to further strengthen its capital position, resulting in an estimated pro forma Tier 1 capital ratio for the combined company of approximately 10 percent.

IT’S A TARP! Good going, PNC. National City, nice to have known ya. And it’s amusing to see none of that TARP money is being lent out, and it’s being used for acquisitions instead.