Bank of Montreal buys American bank for US$4.1B
Published Friday, December 17, 2010 4:02PM EST
Canada's Bank of Montreal is almost doubling its footprint south of the border with the pending acquisition of a Wisconsin-based bank for US$4.1 billion in shares.
BMO Financial Group announced the deal with Milwaukee-based Marshall & Ilsley Corp. on Friday, saying the sides have reached a "definite agreement."
Bill Downe, BMO's president and CEO, said the sale makes BMO more competitive in the American market.
"The acquisition is consistent with our strategy to strengthen our North American businesses," Downe said in a statement.
The deal is expected to be finalized by July 2011.
Absorbing M&I's 374 branches will bring BMO's total number of U.S. branches to almost 700. BMO already has a strong presence in Chicago with its Harris subsidiary.
BNN's Michael Kane said that raises the question of whether M&I's assets will be folded into the Harris portfolio.
Kane said Canada's business community has been anticipating an acquisition of this size.
However, some investors won't accept the amount of risk the deal carries, he told CTV News Channel.
"An acquisition of this size is pretty gutsy, particularly because it puts Bank of Montreal outside of its very comfortable Chicagoland holdings."
Kane said M&I is seen as a distressed bank because it suffered a big hit during the economic downturn and received government aid.
BMO is acquiring all outstanding M&I shares in a stock-for-stock transaction. Each M&I share will be exchanged for 0.1257 shares of Bank of Montreal based on Thursday's closing stock market figures, according to a statement.
Each M&I share is valued at US$7.75. BMO shares are valued at $62.05 apiece.
The deal carries one-time merger and integration costs of about $540 million, BMO said.
Still, BMO said the deal gives it attractive profits, entry into markets such as Minnesota, Missouri and Kansas, and expansion in Indiana and Wisconsin.
BMO said it will maintain strong capital ratios once the deal is finalized. The bank intends to raise an additional $800 million before the sale is approved.
M&I has US$51.9 billion in assets.
Mark Furlong, M&I's chairman, president and CEO, is staying on to become the head of BMO's combined U.S. personal and commercial banking business in Chicago.
BMO shares fell $3.87 or six per cent to $58.18 on the Toronto Stock Exchange after the deal was announced.
With files from The Canadian Press.