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BMO Financial Group to acquire Marshall & Ilsley

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BMO Financial Group has entered into a definitive agreement to acquire all outstanding shares of common stock of financial services corporation Marshall & Ilsley in a stock-for-stock transaction.



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 CAD62.05 on 16 December  2010, the transaction values each share of M&I at USD7.75, or an aggregate amount of approximately USD4.1bn in Bank of Montreal common shares. The closing share price of M&I on NYSE on 16 December was USD5.79.

BMO expects to maintain strong capital ratios after the acquisition. BMO intends to raise approximately CAD800m in additional common equity prior to closing of the acquisition. 

The transaction has an estimated internal rate of return to BMO of more than 15 per cent and is expected to be accretive to BMO’s earnings in 2013, excluding one-time merger and integration costs of approximately CAD540m. The transaction is expected to generate annual run-rate synergies of approximately CAD250m which will be fully phased in by the end of fiscal 2013.

As part of the agreement, BMO will purchase M&I’s TARP preferred shares at par plus accrued interest – with full repayment to the US Treasury immediately prior to closing. M&I’s existing warrants held by the US Treasury will also be purchased by BMO.

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

"The acquisition is consistent with our strategy to strengthen our North American businesses. It transforms BMO’s competitive position in the US Midwest by bringing together highly complementary businesses that align well with BMO’s retail, commercial, and asset/wealth management businesses in the US It also increases scale and provides strong entry into other attractive markets, including Minnesota, Missouri, and Kansas, and expansion in Indiana and Wisconsin," says Bill Downe, president and chief executive officer, BMO Financial Group. 

Upon closing, Mark Furlong, who is currently chairman, president and chief executive of M&I, will become chief executive of the combined US personal and commercial banking business, based in Chicago. He will report to Downe and will join BMO’s management committee. 

Ellen Costello will be chief executive of Harris Financial and US country head for BMO with governance oversight for all US operations. She will report to Downe and will be a member of BMO’s management committee.
Furlong says: "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."

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