M&I Snapped Up in $4.1B Stock Swap Deal

December 17, 2010 (PLANSPONSOR.com) – BMO Financial Group announced Friday that it will acquire Marshall & Ilsley Corporation (M&I) in a stock-for-stock transaction.

A joint news release about the $4.1 billion deal said each outstanding share of M&I will be exchanged for 0.1257 shares of Bank of Montreal. Based on the closing share price of Bank of Montreal on the TSX of C$62.05 on Thursday,  the transaction values each share of M&I at US$7.75.The closing share price of M&I on the NYSE on December 16 was US$5.79.

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, according to the announcement. He will report to Bill Downe, President and Chief Executive Officer of the Toronto-based BMO Financial Group and will join BMO’s Management Committee.  Also, on closing, Ellen Costello will be CEO of Harris Financial Corp. and U.S. Country Head for BMO with governance oversight for all U.S. operations, also reporting to Downe and also a member of BMO’s Management Committee.

Under the terms of the merger agreement, M&I will merge with a BMO subsidiary, and existing M&I shareholders will become entitled to receive common shares of Bank of Montreal.  M&I is based in Milwaukee and has $110 billion in assets.

As part of the agreement, BMO will buy M&I’s 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.

According to a Wall Street Journal account of the deal, M&I has struggled with soured construction and other loans, and it’s been unclear whether the bank could raise enough capital to pay back its TARP money.

“The acquisition is consistent with our strategy to strengthen our North American businesses.  It transforms BMO’s competitive position in the U.S. Midwest by bringing together businesses that align well with BMO’s retail, commercial, and asset/wealth management businesses in the U.S. It also increases scale and provides strong entry into other attractive markets, including Minnesota, Missouri, and Kansas, and expansion in Indiana and Wisconsin,” said Downe.

Furlong said: “This transaction is 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.” 

The transaction, which has been approved by the BMO and M&I  Boards of Directors, is expected to close prior to July 31, 2011. 

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