Bank of America to buy MBNA

$35 billion merger to result in 6,000 job cuts

July 01, 2005|By Laura Smitherman and Paul Adams | Laura Smitherman and Paul Adams,SUN STAFF

Bank of America Corp. will acquire MBNA Corp. -- the credit card giant that traces its roots to the Baltimore area, where it still has operations -- in a $35 billion cash and stock deal that will result in 6,000 job cuts nationwide.

The sale will shake up the credit card industry, likely leaving consumers with fewer choices and higher fees, experts said. And it will reverberate throughout Maryland's business and political establishment, which has long had ties to MBNA's current and former executives.

MBNA's move to Delaware in 1982 after a legislative dispute over a cap on credit card interest rates is remembered by many in Annapolis as one of the biggest political blunders in Maryland history.

During a New York news conference yesterday, Bank of America and MBNA executives said that they haven't determined where jobs will be eliminated but that they will target duplicating services such as personnel and administrative posts.

Together, the companies employ 200,000 people across the country, including 1,100 MBNA employees in Hunt Valley who work in telemarketing and customer service. Bank of America employs 3,540 at branches around the state and at a Baltimore headquarters. MBNA has more than 25,000 workers nationwide.

Some MBNA workers interviewed briefly at the company's Hunt Valley offices yesterday said they learned of the deal through news reports and a morning e-mail. They were not informed of specific job cuts.

MBNA's president and chief executive, Bruce L. Hammonds, said the sale to Charlotte-based Bank of America, the nation's largest retail bank, may have prevented larger layoffs as his company's growth was stagnating. MBNA is the nation's second-largest credit card issuer.

Hammonds will remain as head of the combined company's credit card division in Wilmington, Del., so a "significant" part of the business will stay where MBNA is based.

It took one week to cobble together the deal, after MBNA officials contacted Bank of America's brass to gauge their interest June 22. Days earlier, a helicopter carrying Hammonds and MBNA's vice chairman, Frank D. Bramble Sr., crashed into the East River near Manhattan. All aboard survived. Hammonds said yesterday that they had been meeting with financial advisers to discuss the company's options and were en route back to Wilmington.

The acquisition will reshuffle the credit card industry, making Bank of America the largest issuer in the United States, with 20 percent of the market. It also marks the culmination of years of consolidation that has transformed the banking industry.

Baltimore almost played a big role in that transformation.

It was politics that drove the company from Maryland, after lawmakers refused to deal with the credit card company. And it was the company's political ties that brought it back in 1997, with the establishment of a regional headquarters in Hunt Valley, which is threatened with layoffs.

The company's roots in the state date to the 1960s, when MNC Financial, the parent of Maryland National Bank, formed a small credit card company. The division thrived in Maryland until sky-high interest rates in the early 1980s led to a political showdown in Annapolis.

Lawmakers were seeking to protect consumers from the high interest rates being charged by banks and refused to lift a law restricting credit card rates. Company officials pushed for the change, but lawmakers were unmoved, setting up the company's departure to Wilmington, where Delaware officials had lifted restrictions.

Baltimore officials have watched with envy over the years as Charles M. Cawley, who retired as MBNA's chief executive in 2003, transformed downtown Wilmington with six opulent office buildings staffed with thousands of well-paid white-collar workers. The company is Delaware's largest private employer, with 10,680 jobs.

"I remember the attorney general saying, `Oh, they're bluffing, they're bluffing,'" said Comptroller William Donald Schaefer, former mayor of Baltimore and Maryland governor. Schaefer tried to persuade lawmakers to keep the company from moving.

Despite some hard feelings, MBNA executives maintained ties to Maryland. Cawley and the company's executives have given generously over the years to Maryland politicians, most notably C.A. Dutch Ruppersberger, the former Baltimore County executive who is now in Congress.

It was Cawley's close friendship with Ruppersberger and former state Sen. Francis X. Kelly that helped drive MBNA's decision to locate an office in Hunt Valley. Ruppersberger worried for those jobs yesterday.

"I'm just very concerned whenever there's a merger," Ruppersberger said. "Bank of America understands how important those jobs are to us in Hunt Valley."

David S. Iannucci, executive director of Baltimore County's Department of Economic Development, said MBNA has been a significant player "in the corporate community -- philanthropically, and in their investments in Maryland and Baltimore County."

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