8-KMaterial AgreementsExhibits & Filings

PNC FINANCIAL SERVICES GROUP, INC. 8-K Report, Material Agreement (Dec 30, 2008)

Filed December 30, 2008For Securities:PNC

Summary

PNC Financial Services Group, Inc. (PNC) filed an 8-K on December 29, 2008, detailing a material definitive agreement to restructure its ownership stake in BlackRock, Inc. This transaction primarily aims to reduce the volatility of PNC's net income stemming from the mark-to-market accounting of its obligation to deliver BlackRock stock for its Long-Term Incentive Plan (LTIP). By exchanging a portion of its BlackRock common stock for Series B and Series C preferred stock, PNC can utilize accounting standards (SFAS 159) to offset the impact of marking its LTIP liabilities to market, thereby smoothing earnings. While PNC's economic interest in BlackRock is largely preserved, and its share of dividends remains unaffected, its reported percentage ownership of BlackRock common stock is expected to increase significantly from 36.5% to 47%. This is due to Merrill Lynch also restructuring its BlackRock holdings in anticipation of its merger with Bank of America. PNC's share of BlackRock's earnings, however, will slightly decrease from 33% to 32% due to the specific accounting treatment of the new preferred stock. The voting rights on PNC's BlackRock shares remain subject to an existing agreement requiring PNC to vote in accordance with BlackRock's board recommendations.

Key Highlights

  • 1PNC entered into an Exchange Agreement with BlackRock on December 26, 2008, to restructure its equity holdings.
  • 2The transaction aims to reduce net income volatility associated with BlackRock's LTIP obligations by exchanging common stock for preferred stock.
  • 3PNC's percentage ownership of BlackRock Common Stock is expected to increase from 36.5% to 47% after the exchanges.
  • 4PNC's share of BlackRock earnings, accounted for under the equity method, will slightly decrease from 33% to 32%.
  • 5PNC will replace its obligation to deliver BlackRock common stock for LTIP funding with an obligation to deliver BlackRock Series C preferred stock.
  • 6PNC can elect to mark-to-market its Series C preferred stock holdings, offsetting LTIP liability mark-to-market impacts.
  • 7PNC's voting rights on its BlackRock shares remain bound by an agreement to follow BlackRock's board recommendations.

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