I fully expect to see more M&A in the regional space by stronger capitalized foreign banks as there is value to be had if you can inject capital and withstand balance sheet pressure. I also expect tier 2 domestic banks to buy the regionals (PNC/RF rumor...). One interesting way to play this is through the hybrid securities of regionals. If the bank is taken out by a stronger player (especially foreign) then the lack of tier 1 capital status could lead to tender/call/redemption of the hybrids.
(WSJ) Bank of Montreal, Canada's fourth-largest bank in assets, said it is buying Milwaukee, Wis.-based lender Marshall & Ilsley Corp. in a share swap valued at US$4.1 billion, making a long-anticipated move to expand its operations in the U.S.
BMO said Friday it is offering 0.1257 of a share for each M&I share. Based on Bank of Montreal's closing stock price in Toronto Thursday of C$62.05, the deal values M&I at US$7.75 a share. To keep capital strong after the acquisition, the bank plans to issue an additional C$800 million in equity before the deal closes prior to July 31, 2011.
BMO also will repay around US$1.7 billion that M&I received from the U.S. government's Troubled Asset Loan Program.
The purchase bolsters BMO's position in the Midwestern states, where it's operated Chicago-based Harris Bank since 1984. The acquisition nearly doubles BMO's deposit base in the U.S., to US$92 billion, and more than doubles BMO's branches in the U.S., to 695.
It is the latest in a string of U.S. purchases by Canadian banks, which have weathered the financial crisis and recession far better than most of their peers to the south.
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