BMO Financial Group to Acquire M&I

With a goal of strengthening its U.S. businesses by increasing scale and providing entry into new and attractive markets, BMO Financial Group (Toronto) confirmed it has entered into a definitive agreement with Marshall & Ilsley Corp. (M&I, Milwaukee) under which BMO will acquire all outstanding shares of common stock of M&I in a stock-for-stock transaction. The transaction, which has been approved by the BMO and M&I Boards of Directors, is expected to close prior to July 31, 2011.

Based on current numbers of BMO's and M&I's respective U.S. asset and deposit sizes and number of branch, the combined organization is expected to total $160 billion in assets, $92 billion in deposits and a 695-unit branch network.

"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 highly complementary 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 Bill Downe, President and CEO, BMO Financial Group, in a press release. "For customers, shareholders and employees, the combined bank group will be a stronger entity. This acquisition gives us the opportunity to leverage the greatest strength of both organizations: our brands and reputations."

Downe continued: "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 ... 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. He will report to Downe and will join BMO's Management Committee. Also, upon 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. She will report to Downe and will be a member of BMO's Management Committee.

In the announcement, 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."

According to the announcement, Furlong, in partnership with Costello, will lead the integration effort of merging the companies, with focus on disciplined execution of the companies' plans. Both companies have significant experience at completing numerous transactions successfully, they said in the press release.

Under the terms of the agreement, each outstanding share of M&I will be exchanged for 0.1257 shares of Bank of Montreal upon closing. Based on the closing share price of Bank of Montreal on the TSX of CD$62.05 on Dec. 16, 2010, the transaction values each share of M&I at US$ 7.75, or an aggregate amount of approximately US$4.1 billion in Bank of Montreal common shares. The closing share price of M&I on NYSE on December 16 was US$5.79.

As part of the agreement, BMO will purchase 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.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio