Bank of America announced yesterday that it is acquiring MBNA Coporation. After this transaction is complete, Bank of America will be one of the largest credit issuers in the U.S.

“This acquisition makes strategic sense for our combined customers and shareholders. It provides us access to MBNA’s attractive portfolio as well as their leading product, service and marketing capabilities,” said Bank of America Chairman and CEO Kenneth D. Lewis.

The transaction is worth $35 billion at $27.50 per MBNA share. Shareholders of MBNA will get 0.5009 shares of Bank of America common stock for each of their shares, plus $4.125 in cash for each share.

Its “not only about the creation of one of the world’s largest card providers. That is compelling in and of itself,” said Lewis. “But it’s really a much larger story about two companies with complementary strengths. The result will be the country’s top retailer of financial services with the size and scale to drive distribution and marketing efficiencies.”

After this transaction, Bank of America will manage 40 million active accounts as well as $143 billion in outstanding balances. They will also add 20 million new customer accounts.

“We can now deepen existing and future customer relationships with differentiated capabilities to exceed customer expectations and grow market share,” he added. “This merger also provides us with an attractive foothold in Canada, the United Kingdom, Spain and Ireland.”

According to a press release, Bank of America expects to achieve overall expense efficiencies of $850 million after-tax, which would be fully realized in 2007, and anticipates a restructuring charge of $1.25 billion after-tax. Cost reductions will come from a range of sources, including the reduction of 6,000 jobs. Additional savings will be achieved through the elimination of overlapping technology, vendor leverage, and marketing expense.

“The merger will create one of the largest credit card portfolios and will give the combined company access to new marketing channels, customers, products and opportunities for further expansion,” said MBNA President and CEO Bruce Hammonds. “Both companies benefit as cross-sell opportunities exist to sell MBNA products to Bank of America customers and Bank of America products to MBNA customers.

Bank of America will be the fourth most profitable company in the world, the company said. The deal is expected to close in the fourth quarter of 2005.

Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.