Huge Share Sale Hangs over Capital One

Capital One Financial Corp. (NYSE: COF) might be one of the safer banks in America and it may be adding assets where it can, but now its shareholders are getting clipped a little after the company issued a press release disclosing a rather large secondary offering of its common stock. The good news: the overhang is tied to a past acquisition and shares are holding up well on the news.

The credit card and retail bank outfit has reported that ING Bank N.V. is the selling stockholder and that the overseas financial giant intends to sell its entire stake of nearly 54 million shares of Capital One’s common stock. The offering will be via an underwritten public offering. It will be led by joint book-running managing firms BofA Merrill Lynch, Morgan Stanley and Citigroup. It is leaving the back door open for this to not all come out at once because the report shows that the offering will be “at prevailing market prices or otherwise from time to time through the NYSE, the over-the-counter market, negotiated transactions or otherwise.”

Capital One did confirm that it is not selling any shares in this proposed stock offering and all net proceeds from the share sale will be retained by ING Bank N.V.

As a reminder, this is not exactly a sale based upon bad blood nor based upon a lack of faith in management. Capital One announced in the summer of 2011 that it was going to buy ING’s online banking assets in the United States for $9 billion in cash and stock (roughly $6.2 billion in cash and $2.8 billion in stock at the time). Capital One raised new capital and took on debt to finance the transaction.

The value at today’s closing price of $56.49 for Capital One would be roughly $3.05 billion and the market capitalization rate is $32.6 billion.

Capital One shares were down just over 1% at $55.90 on last look in the after-hours trading reaction against a 52-week trading range of $36.33 to $58.69.

JON C. OGG