November 1, 2010

Wilmington Trust, M&T Bank Agree to Merge

M&T to retain Wilmington brand for wealth advisory, corporate services

M&T Bank Corp. and Wilmington Trust Corp. have entered into a definitive agreement under which Wilmington Trust will merge with M&T, the two firms announced Monday.

Under the terms of the merger agreement, Wilmington Trust common shareholders will receive 0.051372 shares of M&T common stock in exchange for each share of Wilmington Trust common stock they own in a stock-for-stock transaction valued at approximately $351 million that is expected to close by the middle of 2011.

Headquartered in Buffalo, N.Y., M&T has $68.2 billion in assets, and has extensive operations in the Mid-Atlantic Region. Wilmington Trust, based in Wilmington, Del., has $10.4 billion in assets.

The combination of the two companies' complementary advisory businesses—Wilmington Trust's Wealth Advisory Services and Corporate Client Services units and M&T's Investment Group—will both grow and diversify the combined company's revenue stream, according to the announcement.

M&T will retain the Wilmington Trust brand for all wealth advisory and corporate services businesses, which will be based in Delaware, and will seek to introduce those services to its existing commercial banking customers across the M&T footprint, the statement said. Simultaneously, M&T will introduce its branch-based retail investment and insurance-related businesses across the Wilmington Trust branch network under the M&T Securities brand.

Based on M&T's closing stock price of $74.75 on October 29, the transaction is valued at $3.84 per Wilmington Trust share, according to the announcement. The purchase price represents 1.0x tangible book value as of September 30. M&T anticipates that the transaction will be accretive to GAAP and operating earnings per share in 2012, and estimates its internal rate of return on the investment to exceed 20%.

Donald E. Foley, chairman and chief executive of Wilmington Trust, explained in a statement his firm’s decision to merge with M&T: "Wilmington Trust today has two very strong fee-based businesses that continue to perform well. However, as our third quarter earnings announcement shows, we continue to face difficult

financial realities associated with the credit quality of the loan portfolio in our banking business. As a result, our Board examined a range of strategic alternatives and has held discussions with several potential partners. After careful study, the Board, advised by its lead financial adviser Lazard Freres & Co. LLC, concluded that our merger with M&T is the best available option for our stockholders and also serves the interests of our clients and almost 3,000 staff members."  

The statement said M&T’s merger with Wilmington Trust will extend its community banking franchise, and add to its market-leading positions in Upstate New York, Central Pennsylvania and the Mid-Atlantic region. M&T will acquire 48 branch locations in Delaware and 225 ATMs, and there is no overlap between branch networks. Following completion of the merger, M&T will operate some 800 branches and 2,000 ATMs in eight states, the District of Columbia and Ontario.

"This strategic partnership brings together two institutions that share many common values, and that operate several distinct but complementary lines of business," Robert Wilmers, M&T chairman and chief executive, said in the statement. "By leveraging the combined strengths of both organizations, we are building an even more powerful franchise with strength and stability, scale and density and top-of-class products and services."

Lazard Freres & Co acted as lead financial adviser to Wilmington Trust, and Morgan Stanley provided a fairness opinion on the transaction. Skadden, Arps, Slate, Meagher & Flom acted as its legal adviser. RBC Capital Markets acted as financial advisor to M&T, and Wachtell, Lipton, Rosen & Katz acted as its legal adviser.

According to the announcement, M&T expects to gain approximately $8.3 billion in deposits and $8.1 billion in loans from the merger (before acquisition accounting adjustments), giving M&T the top deposit share and a leading commercial lending position in Delaware. The bank already has the top commercial lending share in Maryland, is the top SBA lender in the Baltimore, Philadelphia and Washington, D.C. districts and holds the second-largest deposit share in Maryland.

For their part, Wilmington Trust's individual and commercial customers can continue to bank in the same locations and with the same banking professionals they know today, the statement said. In addition, they will gain access to M&T's wider network of branches and ATMs and a wider variety of products and services.

M&T will continue Wilmington Trust's tradition of involvement in its Delaware communities and maintain its existing level of charitable activities.

M&T will assume responsibility for Wilmington Trust's $330 million in Series A preferred stock sold to the U.S. Treasury under the U.S. government's Capital Purchase Program in December 2008.

The merger has been approved by the boards of directors of each company, and is subject to certain customary conditions, including regulatory approval and approval by Wilmington Trust's common shareholders. After the transaction is completed, Foley will be appointed to the boards of directors of M&T and its principal banking subsidiary, M&T Bank.

Wilmington Trust is a financial services holding company that provides regional banking services throughout the mid-Atlantic region, wealth advisory services to high-net-worth clients in 36 countries, and corporate client services to institutional clients in 89 countries. Its wholly owned bank subsidiary, Wilmington Trust Company, which was founded in 1903, is one of the largest personal trust providers in the U.S. and the leading retail and commercial bank in Delaware.

M&T is a bank holding company. M&T's banking subsidiaries, M&T Bank and M&T Bank, National Association, operate retail and commercial bank branches in New York, Pennsylvania, Maryland, Virginia, West Virginia, New Jersey, Delaware, the District of Columbia and Ontario, Canada.

Read M&T Securities President and CEO Chris Randall's thoughts on bank wealth management at AdvisorOne.com.

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