20061009 The PNC Financial Services Group to Acquire Mercantile

The PNC Financial Services Group to Acquire Mercantile

Monday, October 9, 2006

Pasted below is the press release posted on PNC's web site early this morning. Read it carefully. I think that it was written by George Orwell.

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Merger will speed expansion in Mid-Atlantic region Adding highly profitable commercial banking and wealth management franchise
PITTSBURGH and BALTIMORE, Oct. 9 /PRNewswire-FirstCall/ -- The PNCFinancial Services Group, Inc. (NYSE: PNC) and Mercantile BanksharesCorporation (Nasdaq: MRBK), today announced that they have signed adefinitive agreement for PNC to acquire Mercantile for $47.24 per share, orapproximately $6.0 billion in stock and cash.

Mercantile is a $17 billion asset banking company that provides bankingand investment and wealth management services through 240 offices inMaryland, Virginia, the District of Columbia, Delaware and SoutheasternPennsylvania. The transaction enables PNC to significantly expand itspresence in the Mid- Atlantic region, particularly the attractive Baltimoreand Washington, D.C. markets.

"Mercantile is a storied franchise and a perfect fit for PNC," saidJames E. Rohr, chairman and chief executive officer of The PNC FinancialServices Group. "Its location, wealth management business andrelationship-based banking model will add to PNC's strengths and ability togrow profits."

"This transaction is about the growth of two companies that fittogether exceptionally well. Our strong performance over the last severalyears has resulted in an attractive premium for our shareholders," saidMercantile Chairman, President and Chief Executive Officer Edward J. (Ned)Kelly III. "The combined company will have greater scale and scope toinvest in the future and create even more opportunities for our employeesand the communities we serve."

PNC Bank Executive Vice President Joseph Rockey and Mercantile ChiefAdministrative Officer and Deputy General Counsel Michael Paese areexpected to oversee the integration process. Rockey had day-to-dayresponsibility for PNC's successful 2005 integration of Riggs NationalCorporation and 2004 integration of United National Bancorp. Paese executedall of Mercantile's acquisitions since 2003, including the purchases of F&MBancorp, Community Bank of Northern Virginia and James Monroe Bancorp, Inc.

PNC anticipates that the transaction will be accretive to earnings pershare in 2008, and that it has an estimated internal rate of return ofapproximately 15 percent.

The acquisition of Mercantile is expected to make PNC a top-10 U.S.bank holding company by market capitalization and the 11th largest U.S.bank by deposits.

Under terms of the merger agreement, which has been approved by theBoards of Directors of both companies, Mercantile will merge into PNC.After closing, PNC intends to merge Mercantile's banking affiliates intoPNC Bank. Based on PNC's closing NYSE stock price of $73.60 on October 6,2006, the transaction values each share of Mercantile's common stock at$47.24. The aggregate consideration is composed of a fixed number ofapproximately 52.5 million shares of PNC common stock and $2.13 billion incash. Mercantile shareholders will be entitled to 0.4184 shares of PNCcommon stock and $16.45 in cash for each share of Mercantile.

Two Mercantile directors will join the board of the combined company.

Kelly will be appointed a PNC vice chairman upon close of the transaction.The transaction is expected to close during the first quarter of 2007.

The merger is subject to customary closing conditions, including regulatoryapproval and the approval of Mercantile's shareholders. After closing,Mercantile affiliate offices will assume the PNC Bank name.

The transaction is expected to result in the reduction of more than$100 million of operating expenses through the elimination of operationaland administrative redundancies.

PNC will donate $25 million to a charitable foundation dedicated toaddressing the needs of the greater Baltimore area. This first stepunderscores PNC's commitment to strong and active involvement inMercantile's community.

Citigroup Corporate and Investment Banking and Goldman Sachs acted asfinancial advisers to PNC, and Wachtell, Lipton, Rosen & Katz acted as itslegal adviser. Sandler O'Neill + Partners, L.P. acted as financial adviserto Mercantile and Davis Polk & Wardwell and Venable, LLP acted as its legaladvisers.

CONFERENCE CALL AND SUPPLEMENTARY INFORMATION

Rohr, Kelly and PNC Chief Financial Officer Richard J. Johnson willhold a conference call for investors at 9 a.m. Eastern Time today regardingthe announcement of the acquisition. Live webcast and telephone conferenceoptions are available.

Internet access to the webcast, which includes audio(listen- only) and presentation slides, will be available on PNC's Web siteat http://www.pnc.com/ under "About PNC - Investor Relations." Access to theconference call by telephone will be available by calling 800-990-2718(domestic) and 706-643-0187 (international). Investors should call 5-10minutes before the start of the call.

Presentation slides and appendix,which includes significant financial information that will be discussed onthe conference call, will be available on PNC's Web site under "About PNC -Investor Relations" prior to the beginning of the conference call. A replayof the webcast will be available on PNC's Web site for thirty days, and ataped replay of the audio portion of the conference call will be availablefor one week at 800-642-1687 (domestic) and 706-645-9291 (international),conference ID 8500781.

The conference call may include a discussion of non-GAAP financialmeasures, which, to the extent not so qualified during the conference call,is qualified by GAAP reconciliation information that will be made availableon PNC's Web site under "About PNC - Investor Relations." The conferencecall may include forward-looking information, which along with thepresentation slides and this news release, is subject to the cautionarystatements that follow.

Mercantile Bankshares Corporation (http://www.mercantile.com), with more than $17 billion in assets, is a regional multi-bank holding company with headquarters in Baltimore. Its member banks serve communities in Maryland, Washington, D.C., Northern Virginia, the Delmarva Peninsula and southernPennsylvania from a network of 240 branch offices and 250 ATMs. The Investment & Wealth Management division has assets under administration in excess of $47 billion, with management responsibility for more than $20 billion of these assets.

The PNC Financial Services Group, Inc. (http://www.pnc.com) is one of thenation's largest diversified financial services organizations providingretail and business banking; specialized services for corporations andgovernment entities, including corporate banking, real estate finance andasset-based lending; wealth management; asset management and global fundservices.

Cautionary Statement Regarding Forward-Looking Information
This press release contains forward-looking statements regarding ouroutlook or expectations with respect to the planned acquisition ofMercantile, the expected costs to be incurred in connection with theacquisition, Mercantile's future performance and consequences of itsintegration into PNC, and the impact of the transaction on PNC's futureperformance.

Forward-looking statements are subject to numerous assumptions, risksand uncertainties, which change over time. The forward-looking statementsin this press release speak only as of the date of the press release, andeach of PNC and Mercantile assumes no duty, and does not undertake, toupdate them. Actual results or future events could differ, possiblymaterially, from those that we anticipated in these forward-lookingstatements.

These forward-looking statements are subject to the principal

risks anduncertainties applicable to the respective businesses of PNC and Mercantilegenerally that are disclosed in the 2005 Form 10-K and in current year Form10-Qs and 8-Ks of PNC and Mercantile (accessible on the SEC's website athttp://www.sec.gov/ and on PNC's website at http://www.pnc.com/ and on Mercantile's website at http://www.mercantile.com/ respectively). In addition, forward-looking statements in this press release are subject to the following risks and uncertainties related both to the acquisition transaction itself and to the integration of the acquired business into PNC after closing:

Completion of the transaction is dependent on, among other things,receipt of regulatory and shareholder approvals, the timing of which cannotbe predicted with precision at this point and which may not be received atall. The impact of the completion of the transaction on PNC's financialstatements will be affected by the timing of the transaction.

The transaction may be substantially more expensive to complete(including the integration of Mercantile's businesses) and the anticipatedbenefits, including anticipated cost savings and strategic gains, may besignificantly harder or take longer to achieve than expected or may not beachieved in their entirety as a result of unexpected factors or events.

The integration of Mercantile's business and operations into PNC, whichwill include conversion of Mercantile's different systems and procedures,may take longer than anticipated or be more costly than anticipated or haveunanticipated adverse results relating to Mercantile's or PNC's existingbusinesses.

The anticipated benefits to PNC are dependent in part on Mercantile'sbusiness performance in the future, and there can be no assurance as toactual future results, which could be impacted by various factors,including the risks and uncertainties generally related to PNC's andMercantile's performance or due to factors related to the acquisition ofMercantile and the process of integrating it into PNC.
ADDITIONAL INFORMATION ABOUT THIS TRANSACTION

The PNC Financial Services Group, Inc. and Mercantile BanksharesCorporation will be filing a proxy statement/prospectus and other relevantdocuments concerning the merger with the United States Securities andExchange Commission (the "SEC"). WE URGE INVESTORS TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

Investors will be able to obtain these documents free of charge at theSEC's web site (http://www.sec.gov). In addition, documents filed with the SEC by The PNC Financial Services Group, Inc. will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Mercantile Bankshares will be available free of charge from MercantileBankshares Corporation, 2 Hopkins Plaza P.O. Box 1477, Baltimore, Maryland21203, Attention: Investor Relations.

The directors, executive officers, and certain other members ofmanagement and employees of Mercantile Bankshares are participants in thesolicitation of proxies in favor of the merger from the shareholders ofMercantile Bankshares. Information about the directors and executiveofficers of Mercantile Bankshares is set forth in the proxy statement forits 2006 annual meeting of stockholders, which was filed with the SEC onMarch 29, 2006. Additional information regarding the interests of suchparticipants will be included in the proxy statement/prospectus and theother relevant documents filed with the SEC when they become available.

SOURCE PNC Financial Services Group, Inc.