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.
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.