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WASHINGTON, D.C. — In a deal expected to close during the first quarter of next year, Capital One Financial Corp. will acquire Chevy Chase Bank for $445 million in cash and $75 million in Capital One shares.
The acquisition is expected to generate an internal rate of return for Capital One totaling more than 13 percent, a $125 million reduction in the company’s non-interest expenses and $225 million in merger and integration costs. Capital One will also assume a net credit mark of $1.75 billion for potential losses in the bank’s portfolio. At the time of the deal, Chevy Chase held $11 billion in deposits.

“This transaction will enhance our strong deposit base, providing us with greater scope in the Mid-Atlantic markets. At a time when core funding is key, we see our deposit strength as an important element of our continued success,” Richard D. Fairbank, chairman and CEO of Capital One, said in a statement.

Capital One, based in McLean, Va., holds $98.9 billion in deposits and $147.3 billion in managed loans as of September 30, 2008. Chevy Chase Bank offers construction and mini-permanent loans for commercial real estate projects. In November, Chevy Chase and a consortium of lenders provided financing for construction of a 383,392-square-foot office building in Washington, D.C. The $194 million loan was secured for developer Connecticut & K Associates by Cassidy & Pinkard Colliers.

Capital One was advised in the transaction by financial teams at Credit Suisse Securities (USA) and Centerview Partners and the law firms Wachtell, Lipon, Rozen & Katz and K&L Gates. Citigroup Global Markets and Mayer Brown advised Chevy Chase Bank.

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