The Bank of Montreal announced Friday that it is acquiring Wisconsin's Marshall & Ilsley Corp., whose M&I Bank has significant operations in Minnesota, for about $4.1 billion in stock.
The deal will double Bank of Montreal's U.S. deposits and branches and may spark more mergers among regional banks. It values M&I at $7.75 a share, 34 percent higher than Thursday's closing price of $5.79 on the New York Stock Exchange.
M&I, with headquarters in Milwaukee, has 200 locations in Wisconsin, 33 in Minnesota, and others in Arizona, Illinois, Kansas, Missouri, Florida and Indiana, according to the FDIC. The Minnesota offices are in the Twin Cities area except for one in Duluth.
The bank has 9,100 employees, including 450 in Minnesota. An M&I spokeswoman said the new owners will assess staffing needs and that no decisions have been made about organizational changes. The bank intends to be "thoughtful and measured" in its approach, said spokeswoman Sara Schmitz.
The news sent shares of M&I surging 18 percent, up $1.06, to close at $6.85 Friday, while U.S.-traded shares of the Bank of Montreal fell $4.40, or 7 percent, to $57.26.
Canadian banks, ranked the soundest in the world by the World Economic Forum, weathered the economic crisis far better than counterparts in other countries. At the same time, many U.S. regional banks have become possible takeover targets, including TCF Financial, headquartered in Wayzata.
Bank of Montreal's action will create a wave of regional bank buying as U.S. regulators redefine rules, said Richard Bove, an analyst for Rochdale Securities in Lutz, Fla.
"Now people are afraid someone is going to come along and do something before the regulations are changed," Bove said. "They don't want to be stuck missing the move."
With the purchase, Bank of Montreal more than doubles its U.S. branches to 695 and increases its U.S. assets by 47 percent to $162 billion. The bank expanded in the United States with its takeover of Harris Bank of Chicago in 1984, and it added two Wisconsin lenders two years ago. In April the Bank of Montreal also bought Amcore Bank from U.S. regulators, adding 52 branches in Illinois and Wisconsin.
Bank of Montreal's takeover would be the third-largest U.S. acquisition by a Canadian bank or insurance company, ranking behind Manulife Financial Corp.'s $10.9 billion purchase of John Hancock Financial Services Inc. in 2003 and Toronto-Dominion's $8.3 billion deal for Commerce Bancorp Inc. in 2007.
M&I has posted eight straight quarterly losses while Bank of Montreal has reported six consecutive quarters of profit growth.
"The timing is very good," Bank of Montreal President and CEO Bill Downe said in an interview with the Associated Press. "It certainly represents a very good value."
Defaults on business and home loans hobbled profit at M&I, with net charge-offs equal to 5.47 percent of average loans and leases during the third quarter. Marshall & Ilsley expanded housing and construction loans in states such as Florida and Arizona, which were among the hardest hit by the real-estate bust.
The lender took $1.72 billion in aid from the U.S. Treasury Department's Troubled Asset Relief Program. Bank of Montreal said in a slide-show presentation that it estimates $4.7 billion of future losses on M&I's real-estate and other loans. The Canadian bank agreed to buy preferred shares that the U.S. government acquired as part of its bailout of the Wisconsin lender. The transaction is expected to close before July 31.
M&I CEO Mark Furlong will be chief executive of the combined U.S. consumer banking business, while Ellen Costello of the Bank of Montreal will be U.S. country head.
The AP and Star Tribune staff writer David Shaffer contributed to this report.
