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A takeover of Sovereign, which had been the fourth-largest bank in the Philadelphia region with 82 branches, would mark another consolidation of the global financial system, although the immediate impact on Sovereign's operations and its customers was unclear.
Spokesmen at Sovereign and Santander declined comment on the report.
The Wall Street Journal, citing people familiar with the matter, said the two banks hope to have a deal in place by this morning, with Santander expected to pay roughly Sovereign's New York Stock Exchange closing price Friday of $3.81 a share. That would value Sovereign at about $2.53 billion, the Journal said.
Santander already owns a 25 percent stake in Sovereign. It took its first 19 percent in 2006 at roughly $27 a share - nearly seven times more than it reportedly now would pay for the rest of the company. Speculation has mounted that the Spanish bank would seek to protect its investment by orchestrating a full takeover.
In late September, Sovereign named former Chittenden Corp. chief executive Paul A. Perrault to replace Joseph P. Campanelli as CEO, effective Jan. 3. Campanelli had been president and CEO since taking over from his predecessor, Jay Sidhu, in 2006. Sidhu had made investors unhappy by negotiating the Santander stake sale without asking for shareholder approval.
Under Sihu, Sovereign made a string of acquisitions and built Sovereign into the second-largest savings and loan in the United States. Campanelli later consolidated Sovereign's executive operations in Boston after acquiring branches from Fleet Financial in its breakup, leaving its nominal headquarters in the Philadelphia area, where it employs about 2,500 people, including 1,500 in Berks County, its original home.
Nationwide, Sovereign has about 750 branches and 12,000 employees.
In recent years, Sovereign got into financial trouble with expansions of home-equity and auto lending, leading to huge write-downs and a $1.4 billion loss in 2007.
Then late last month, the collapse of several giant financial institutions, including the nation's biggest thrift, Washington Mutual Inc., sent Sovereign's share plummeting 72 percent on Sept. 29., its lowest price in more than 20 years. The stock price recovered modestly the next day, but doubts remained.
Sovereign CEO Kirk W. Walters at the time said his company was in much better shape than banks that had failed recently or been strong-armed into mergers. "Our level of risk within the balance sheet and within the loan book is significantly different," he said.
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