FREE MORTGAGE NEWS 4U.COM by Brenda Jarvis

PNC Financial unveiled plans to acquire struggling regional lender National City for approximately $5.58 billion in a deal that will make PNC the nation’s fifth-largest U.S. bank by deposits.

Simultaneously, Pittsburgh-based PNC announced plans to issue $7.7 billion of preferred stock and related warrants to the U.S. Treasury under the government’s new rescue program.

Under terms of the deal, PNC will pay $5.2 billion, or $2.23 per share, for Cleveland-based National City, a price that puts a 19% discount on National City’s closing price Thursday.

For every National City share owned, National City shareholders will receive 0.0392 PNC share. PNC will also pay $384 million in cash to warrant holders of National City.

Shares of PNC rose sharply on the news despite a broad selloff in the stock market. National City, however, plunged double-digit percentages on the offer price.

"We believe this strategic combination will continue PNC's efforts to build capital strength and shareholder value. We are also gratified that we have been selected to participate in Treasury's Capital Purchase Program, which has helped to put this transaction on a very solid footing,” PNC CEO James E. Rohr said in a statement.

National City has been hammered by the subprime bust and credit crisis, losing nearly 90% of its market value from a year ago. Last week National City disclosed a loss of $5.15 billion in the third quarter.

The sale to PNC comes after National City raised billions of dollars from private equity sources and other investors, capital infusions that weren’t enough for it to keep its independence.

As a part of the transaction, one National City director will join the board of the combined company and National City CEO Peter Raskind will be appointed PNC vice chairman.

"The combined company will have greater scale and scope, enhancing service to our customers and communities and providing greater opportunities for our employees. This transaction is about two companies that fit well together in terms of geography, products and services," Raskind said in a statement.

PNC expects to be ranked fourth nationally in number of branches thanks to the merger.

The deal, which is subject to shareholder and regulatory approval, is expected to close at the end of the year.

The buyout of National City comes during a turbulent two months on Wall Street that saw a number of shotgun marriages, including the sale of Wachovia  to Wells Fargo , Merrill Lynch to Bank of America, and Washington Mutual to JPMorgan Chase.

Matt Egan Fox Business