 Bank of America expects to complete the deal this year |
Bank of America, the second-biggest bank in the US, is to buy credit card firm MBNA for $35bn (�19.5bn). The deal will double the size of the bank's credit card operations to 40 million accounts.
Bank of America said the takeover will involve 6,000 job cuts, but gave no further details.
Analysts said the deal was a good one for Bank of America since its size means it is unlikely that it will be allowed to buy any more big banks.
Bank of America currently employs 175,365 people in 35 countries while MBNA has 25,000 staff.
US limits
It already has 10% of US deposits, the maximum permitted under US banking laws.
The bank's chief executive Kenneth Lewis hailed the deal, dubbing MBNA a "selling machine".
He added he would be rebranding MBNA's credit cards with Bank of America's name, however, he did admit he had not yet looked at what to do about American Express cards issued by MBNA.
The last big deal the bank embarked upon was the purchase of FleetBoston Financial Corp for $48bn in April last year.
Since then, it has signed a deal to buy 9% of China Construction Bank - due for flotation next year - for $3bn.
"For Bank of America, it was the only big deal left for them to do," Ted Parrish, manager of the Henssler Equity Fund, told Reuters.
Change of tack
Some analysts suggested the move may be a part of new strategy in the financial sector.
"Credit card companies are realising they may not be able to make it just as a standalone," said Peter Boockvar, equity strategist at Miller Tabak & Co.
Mr Boockvar pointed to a similar deal earlier in June when banking group Washington Mutual bought San Francisco-based credit card firm Providian Financial for $6.45bn.
Meanwhile, credit card companies have been struggling - MBNA forced to close a call centre and axe 1,000 management posts earlier this year.
The group's own chief executive Bruce Hammonds also admitted to analysts that MBNA had been considering a sale for twelve months.
Bank of America shares closed 2.77% lower in New York trading, while MBNA shares were up 24.16%.
Heading overseas
The deal will help Bank of America extend its international profile as MBNA has a foothold in the UK, Canada, Ireland and Spain.
The agreement, set to be completed in the final three months of this year, sees MBNA shareholders get slightly more than half a Bank of America share and $4.125 in cash for every share they hold, valuing MBNA at $27.50 a share.
Bank of America said both boards had blessed the takeover, which remained subject to the approval of regulators.
The bank said it expected the deal to cost it $1.25bn in restructuring charges, but would gain efficiencies of $850m after tax by 2007 - partly by cutting 6,000 jobs.
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For Bank of America, it was the only big deal left for them to do
