M&I Shareholders Approve Merger - Analyst Blog
May 18 2011 - 8:37AM
Zacks
On Tuesday, the shareholders of Marshall & Ilsley
Corporation (MI) approved its merger deal with
Canada-based Bank of Montreal (BMO). The
percentage of shareholders who consented to the impending merger
was not disclosed.
Additionally, the U.S. Treasury Department provided a proxy
giving their assent to the merger as it holds the Senior Preferred
Stock of the company. However, M&I’s merger still
requires all the regulatory consents to materialize. The deal,
which is expected to be completed by July 31, 2011, does not
require the approval of the BMO shareholders.
M&I’s merger with BMO was announced in December 2010. The
all-stock transaction is valued at $4.1 billion. Under the terms of
the deal, M&I’s shareholders will get 0.1257 share of BMO for
each share of the company. The transaction is valued at $7.75 per
share or 34% premium to the closing price of the company’s share on
December 16, 2010.
BMO will also acquire M&I’s Troubled Asset Relief Program
(TARP) shares worth $1.7 billion and will repay the TARP money
before the closure of the deal. Additionally, BMO would assume all
the long-term liabilities of $5.4 billion and purchase the
company’s remaining warrants that are held by the U.S Treasury
department as part of its participation in the TARP.
Following M&I’s merger with BMO, the latter will be able to
extend its reach in the lucrative U.S. market. The deal would also
add 374 branch locations to BMO’s empire, increasing the branch
count to 695 in the U.S.
Our Viewpoint
We believe that the approval of M&I’s merger with BMO was
expected as the shareholders view this offer as the best deal they
could get. The company’s inability to move out of its problem
assets was taking a toll on its financial results for the last
several quarters. So, the merger agreement will expectedly provide
some relief to the investors.
In fact, consolidation has become a norm in the banking sector
after taking a significant hit during the financial crisis. Earlier
this week, M&T Bank Corporation (MTB)
announced the completion of the acquisition of Wilmington Trust
Corporation for about $351 million. Further, in April 2011, New
Alliance Bancshares Inc. was acquired by First Niagara
Financial Group Inc. (FNFG) in a stock-and-cash deal that
was valued at $1.5 billion.
Currently, M&I’s shares retain a Zacks #3 Rank, which
translates into a short-term Hold rating, whereas BMO retains a
Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.
BANK MONTREAL (BMO): Free Stock Analysis Report
FIRST NIAGARA (FNFG): Free Stock Analysis Report
MARSHALL&ILSLEY (MI): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis Report
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