MI-BMO Merger Gets Regulatory Nod - Analyst Blog

Marshall & Ilsley Corporation (MI) and Bank of Montreal (BMO) merger deal is right on track for completion, following the final regulatory approval on Tuesday. With this regulatory nod, the parties have finally garnered all necessary approvals required to complete the merger.

With regard to this, BMO stated that its plan to proceed with common share offering to finance MI merger has been shelved because of its strong capital position. The deal is now expected to close on July 5.

In May, the shareholders of MI approved the merger deal with BMO. The U.S. Treasury Department also provided a proxy giving their assent to the merger as it holds the Senior Preferred Stock of the company.

MI’s merger with BMO, an all-stock transaction valued at $4.1 billion, was announced in December 2010. Under the terms of the deal, MI’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 MI’s Troubled Asset Relief Program (TARP) shares worth $1.7 billion and will repay the TARP money before the closure of the deal. Moreover, BMO would not only assume MI’s long-term liabilities of $5.4 billion, but also purchase the company’s remaining warrants that are held by the U.S Treasury department as part of its participation in the TARP.

Following MI’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.

MI’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 likely provide some relief to the investors of MI.

Currently, MI’s shares retain a Zacks # 4 Rank, which translates into a short-term ‘Sell’ rating, whereas BMO retains a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating.

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