Banking & Finance

Bank & Finance M&A: The Canadians Are Coming (BMO, MI, BAC, C, JPM, WFC, RY, TD, BNS, CM)

Bank of Montreal (NYSE: BMO) is expanding in the U.S.  The fourth largest bank in Canada is acquiring Marshall & Ilsley Corp. (NYSE: MI) for $4.1 billion in stock.  The terms call for a swap of 0.1257 BMO shares per share of M & I, which comes to $7.75 before any effect on the stock.

BMO already owns Harris Bank and adding M & I will almost double the deposit base and expand its lending operations in Wisconsin, Minnesota, Florida, and elsewhere.

BMO will also issue about C$800 million in equity before the deal closes next summer.  As part of the deal, BMO will also repay some $1.7 billion of M & I’s TARP obligations.

Some will wonder if this will mark the start of land grab from stronger foreign banks that want a larger U.S. presence.  Many have called for consolidation of the middle-tier banks.  Bank of America Corporation (NYSE: BAC) is out of the M&A game because it is over the 10% deposit ceiling, Citigroup Inc. (NYSE: C) is divesting rather than acquiring, and J.P. Morgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) have already made their big land grabs.

This leaves that Canadians as the most likely consolidators in the U.S.  Royal Bank of Canada (NYSE: RY), The Toronto-Dominion Bank (NYSE: TD), The Bank Of Nova Scotia (NYSE: BNS), and Canadian Imperial Bank of Commerce (NYSE: CM) are all candidates to acquire companies here.  Picking their targets is from a pool of many weak and many recovering financial companies large and small alike.  Chances are that these Canadian banks are looking at their treasury balances to see how much they can reasonably spend.


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