CIT, Newcourt Ink $42B Deal

The CIT Group will acquire Newcourt Credit Group of Toronto for $4.2 billion in stock, creating the largest publicly-owned commercial financier with $50 billion in assets, the company said Monday.

Under the agreement, each share of Newcourt will be exchanged for 0.92 shares of CIT, which would value Newcourt (NCT) at about $28.25 a share, or a 9.5 percent premium over Friday's closing price of 25 13/16.

CIT Group (CIT) gained 7/8 to 31 5/8.

Even though Newcourt provides vendor financing for star-studded list of clients, including Dell (DELL), Lucent Technologies (LU) and Snap-On Tools, the company has been struggling of late amid falling demand for its asset-backed securities and escalating costs of borrowing. The company negotiated for Deutsche Bank AG to acquire a large stake, but talks broke down last month.

CIT said the deal should add to profits and revenue growth and will result in annual savings of $150 million. The deal has been approved by both boards and is expected to close in the third quarter.

"CIT will benefit from scale, diversification and balance sheet. It will have a very strong marketing presence in North America and Western Europe and a broad business segment mix with strategically focused businesses," said Albert R. Gamper, Jr., CIT chief executive.

Gamper will remain head of the merged entity. Steven K. Hudson, Newcourt's CEO, will become president of the CIT Group. The board will be expanded to 20 from 11 members and will include nine representatives from Newcourt.

Following the acquisition, CIT shareholders will own 54 percent of the combined company and Newcourt shareholders the rest. Dai-Ichi Kangyo Bank, CIT's largest shareholder, will own about 24 percent of the company. CIBC and Nomura Securities, Newcourt's two largest shareholders, each will own about 5 percent and 6 percent.

In 1998, The CIT Group registered income of $338.8 million and more than $26 billion in assets. Newcourt recorded income of $198.2 million and $23 billion in assets.

Written By Jeffry Bartash, CBS MarketWatch