TierOne, CapitalSource end deal

NEW YORK (Reuters) - Commercial lending and investment company CapitalSource Inc CSE.N and Nebraska savings bank TierOne Corp (TONE.O: Quote, Profile, Research) said on Thursday they had ended their merger agreement, making it the latest casualty of the credit crunch.

TierOne said its board also authorized the buyback of up to 10 percent of its shares.

CapitalSource agreed to buy TierOne in a cash-and-stock deal estimated at the time as being worth about $652 million, or $34.46 per share, to boost its commercial lending, investment and asset management business.

Under the terms of the deal, either side could terminate the merger agreement if it was not completed by Feb 17, TierOne said. It said it would not have to pay CapitalSource any termination fees.

Chevy Chase, Maryland-based CapitalSource said on February 18 its board had authorized its chief executive to either terminate the deal or negotiate new terms.

TierOne Corp is the holding company of TierOne Bank, a federally chartered savings bank.

(Reporting by Paritosh Bansal, editing by Leslie Gevirtz, Richard Chang)