M&I sold to Canadian bank for $4.1 billion
BMO Financial Group, the parent company of Harris Bank, said Friday it has agreed to buy Marshall & Ilsley Corp. - Wisconsin's largest bank - for $4.1 billion.
The all-stock deal values Mashall & Ilsley at $7.75 a share, compared with yesterday's closing price of $5.79 on the New York Stock Exchange, Toronto-based BMO, also known as the Bank of Montreal, said today in a statement. BMO's Harris Bank is based in Chicago.
In early trading Friday, M&I's stock was up $1.11 to $6.89.
The sale comes after M&I had posted eight consecutive quarterly losses, struggling to return to profitability after the housing slump and recession caused losses on loans, especially in its Arizona markets.
In a conference call with stock analysts Friday morning, BMO chief executive Bill Downe said, "M&I is a very well-run bank clearly caught in the real estate down draft."
Downe said the acquisition was in keeping with BMO's stated goal of expanding in the Midwest.
The acquisition "transforms BMO's competitive position in the U.S.," Downe said earlier. "It also increases scale and provides strong entry into other attractive markets, including Minnesota, Missouri, and Kansas, and expansion in Indiana and Wisconsin."
"We are very pleased to announce this transaction with M&I. We are committed to ensuring an excellent transition and to maintaining M&I's strong presence and community leadership in Milwaukee and other M&I markets. Making each M&I customer feel welcome will be a high priority for us. Harris and M&I set the standard in the Midwest for exemplary customer experience and commitment to communities, and we will build upon this reputation," added Downe. "We have a brand promise common to each of our businesses. It speaks directly to customers and reinforces our focus on personal and commercial banking in North America."
Upon closing, Mark Furlong, who is currently chairman, president and CEO of M&I, will become CEO of the combined U.S. Personal and Commercial banking business, based in Chicago.
In a statement, Furlong said the transaction was "good news for M&I's shareholders, customers, employees and the communities we serve. It will position us with the capital strength and scale to enhance our commitment to customers and communities. This combination is about two companies that share a vision of building strong long-term customer relationships. BMO has a diversified business mix with a strong reputation for being a consistent lender."
Timothy Sheehy, president of the Metropolitan Milwaukee Association of Commerce, spoke with Furlong early Friday morning.
"They will continue to have a strong, engaged presence here," Sheehy said. "This is a case where Harris, as they are going to be called in this market, are not going to gut the operations here. Mark will maintain a presence here. We always worry about that, but Mark is not leaving this market."
Sheehy said one of the key "driver industries" in Milwaukee is the financial management market. "I don't think this will move us too much," Sheehy said.
Sheehy said that Furlong understands that Milwaukee has lower overhead costs than other major markets. "Harris, being in Chicago, is well aware of that," he said.
Sheehy also noted that the acquisition price was clearly based on the market presence M&I has in Wisconsin as the state's largest bank.
Julia Taylor, president of the Greater Milwaukee Committee, echoed Sheehy's comments.
"We'll look for continued involvement from the leadership of the new bank," Taylor said. "We've seen this happen with other bank acquisitions. We are fortunate to have strong leadership from regional presidents and we assume that will continue."
Added Taylor: "I think this will bring to the marketplace more financial tools and capital for residential and commercial customers."
Taylor said M&I had been a strong supporter of civic and community efforts in the Milwaukee region, including the United Performing Arts Fund (UPAF) and the United Way.
The stunning acquisition is the latest example of Canadian banks moving into the U.S. markets. Three years ago, TD Bank Financial Group, one of the larger financial firms in Canada, agreed to pay $8.5 billion for Commerce Bancorp. And earlier this year, TD moved into Florida, picking up three failed banks.
Bank analyst Jon C. Bruss, chief executive, of Fortress Partners Capital Management Ltd. in Hartland, said while it is "very disappointing" for Wisconsin to lose a major corporate headquarters like M&I, the bank's leadership probably is weary of trying to get back to profitability.
"Management and director fatigue is increasingly becoming a factor in the sale of banks," Bruss said.
Marshall & Ilsley, with $51.9 billion in assets, was founded in 1847. The bank has 192 offices in the state. In addition, M&I has 53 locations throughout Arizona; 33 offices in central Indiana, Indianapolis and nearby communities; 36 offices along Florida's west coast and in central Florida; 15 offices in Kansas City and nearby communities; 26 offices in metropolitan Minneapolis/St. Paul, and one in Duluth, Minn.; and one office in Las Vegas, Nev. M&I's Southwest Bank subsidiary has 17 offices in the greater St. Louis area.
M&I's stock price and dividend had been in a tailspin in the past few years. In 2008, M&I cut the dividend to a penny from 32 cents and saw its stock price drop 48%.
BMO Financial Group was established in 1817 as the Bank of Montreal. The group has total assets of $397 billion as of July 31, 2010, and more than 38,000 employees.
In the United States, customers are served through Harris, as well as BMO Capital MarketsTM, its North American investment and corporate banking division.
In a statement, M&I and BMO said BMO intends to raise approximately $800 million Canadian in additional common equity prior to the closing, which is expected to be sometime prior to July 31 of next year. BMO also said the deal is expected to generate annual run-rate synergies of approximately $250 million Canadian which will be fully phased in by the end of fiscal 2013.
As part of the agreement, BMO said it would purchase M&I TARP preferred shares at par plus accrued interest - with full repayment to the U.S. Treasury immediately prior to closing. M&I's existing warrants held by the U.S. Treasury will also be purchased by BMO.
Earlier this year, Bank of Montreal bought Amcore Bank NA, based in Rockford, Ill., in a Federal Deposit Insurance Corp.-assisted deal.
M&I sold to Canadian bank for $4.1 billion