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Rating:A Fund Firm's Parent is Sold Not Rated 3.0 Email Routing List Email & Route  Print Print
Friday, December 17, 2010

A Fund Firm's Parent is Sold

Reported by Armie Margaret Lee

A Canadian bank is buying a fund firm's parent company. Friday morning, news broke that BMO Financial Group is acquiring Marshall & Ilsley Corp. for $4.1 billion. The all-stock deal is expected to close before July 31.

Milwaukee-based Marshall & Ilsley is the parent of M&I Investment Management Corp., which runs the Marshall line of mutual funds [see profile]. What the deal means for M&I's mutual fund business is not immediately clear.

The New York Times' Deal Book is among the media outlets that picked up on the news this morning. See also coverage from M&I's hometown papers, Milwaukee Journal Sentinel and The Business Journal.
Company Press Release

BMO Financial Group to Acquire Marshall & Ilsley Corporation (M&I)

M&I an excellent strategic, financial, and cultural fit with BMO

TORONTO and MILWAUKEE, Dec. 17, 2010 --

Consistent with BMO's stated objective of expanding its North American banking business in the U.S. Transforms and strengthens BMO's U.S. businesses by increasing scale and providing strong entry into new and attractive markets Transaction provides attractive financial returns for BMO BMO's capital ratios to remain strong Customers and communities will benefit from combination of two organizations with complementary capabilities and a long history of supporting their interests

BMO Financial Group (TSX NYSE: BMO) and Marshall & Ilsley Corporation (NYSE: MI) today announced that they have entered into a definitive agreement under which BMO will acquire all outstanding shares of common stock of M&I 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 C$62.05 on December 16, 2010, the transaction values each share of M&I at US$ 7.75, or an aggregate amount of approximately US$4.1 billion in Bank of Montreal common shares. The closing share price of M&I on NYSE on December 16 was US$5.79.

BMO expects to maintain strong capital ratios after the acquisition; BMO intends to raise approximately C$800 million in additional common equity prior to closing of the acquisition. On a Basel II basis, before considering growth in capital from the business prior to closing, BMO's Tier 1 Capital Ratio as at October 31, 2010, pro forma for the acquisition and equity offering, would be approximately 11.7%.

The transaction has an estimated internal rate of return to BMO of more than 15% and is expected to be accretive to BMO's earnings in 2013, excluding one-time merger and integration costs of approximately C$540 million. The transaction is expected to generate annual run-rate synergies of approximately C$250 million 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 U.S. Treasury immediately prior to closing. M&I's existing warrants held by the U.S. 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 July 31, 2011.

"The acquisition is consistent with our strategy to strengthen our North American businesses. It transforms BMO's competitive position in the U.S. Midwest by bringing together highly complementary businesses that align well with BMO's retail, commercial, and asset/wealth management businesses in the U.S. It also increases scale and provides strong entry into other attractive markets, including Minnesota, Missouri, and Kansas, and expansion in Indiana and Wisconsin," said Bill Downe, President and Chief Executive Officer, BMO Financial Group. "For customers, shareholders and employees, the combined bank group will be a stronger entity. This acquisition gives us the opportunity to leverage the greatest strength of both organizations: our brands and reputations.

"We are very pleased to announce this transaction with M&I. We are committed to ensuring an excellent transition and to maintaining M&I's strong presence and community leadership in Milwaukee and other M&I markets. Making each M&I customer feel welcome will be a high priority for us. Harris and M&I set the standard in the Midwest for exemplary customer experience and commitment to communities, and we will build upon this reputation," added Mr. Downe. "We have a brand promise common to each of our businesses. It speaks directly to customers and reinforces our focus on personal and commercial banking in North America."

Upon closing, Mark Furlong, who is currently Chairman, President and CEO of M&I, will become CEO of the combined U.S. Personal and Commercial banking business, based in Chicago. He will report to Mr. Downe and will join BMO's Management Committee. Also, upon closing, Ellen Costello will be CEO of Harris Financial Corp. and U.S. Country Head for BMO with governance oversight for all U.S. operations. She will report to Mr. Downe and will be a member of BMO's Management Committee.

Mr. Furlong said: "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."

Both companies have proven execution capabilities and have strong management and deep customer relationships. The combined U.S. banking operations will bring together the best people and resources to create a strong team to lead the business forward. Mr. Furlong, in partnership with Ms. Costello, will lead the integration effort of merging the companies, with focus on disciplined execution of the companies' plans. Both companies have significant experience at completing numerous transactions successfully.

Under the terms of the merger agreement announced today, M&I will merge with a BMO subsidiary, and existing M&I shareholders will become entitled to receive common shares of Bank of Montreal. In connection with the merger agreement, M&I issued to BMO an option, exercisable under certain circumstances, to purchase up to 19.7% of M&I's common stock. The transaction is subject to customary closing conditions, including regulatory approvals and approval from shareholders of M&I. Investor information and call

A conference call is scheduled to take place on Friday, December 17, 2010, at 8:00 a.m. (ET) and will feature a presentation followed by a brief question and answer period with analysts. Interested parties can access this call live on a listen-only basis via telephone at: (416) 695-7806 or 1 (888) 789-9572, passcode No. 7214261# (please call between 7:45 a.m. and 7:55 a.m. ET) and via the internet at: www.bmo.com/investorrelations.

Presentation material referenced during the conference call will be available at www.bmo.com/investorrelations.

A rebroadcast of this presentation will be available until midnight ET, Thursday, February 17, 2011, by calling 1 (800) 408-3053 or (905) 694-9451 and entering passcode No. 2446165#. Advisors

BMO Capital Markets and JPMorgan Securities LLC acted as financial advisers to BMO, and Sullivan and Cromwell LLP and Osler Hoskin & Harcourt LLP acted as its legal advisers. BofA Merrill Lynch acted as financial advisor to M&I. Wachtell, Lipton, Rosen & Katz and Godfrey & Kahn acted as legal advisors to the Board of Directors of M&I.

About BMO

Established in 1817 and based in Canada, BMO Financial Group serves more than 10 million personal, commercial, corporate and institutional customers in North America and internationally. Our operating groups - Personal and Commercial Banking, BMO Bank of Montreal in Canada and Harris in the United States; Private Client Group, our wealth management business; and BMO Capital Markets - share one vision: to be the bank that defines great customer experience.

About Marshall & Ilsley

Marshall & Ilsley Corporation (NYSE: MI) is a diversified financial services corporation headquartered in Milwaukee, Wis., with $51.9 billion in assets. Founded in 1847, M&I Marshall & Ilsley Bank is the largest Wisconsin-based bank, with 192 offices throughout the state. In addition, M&I has 53 locations throughout Arizona; 36 offices along Florida's west coast and in central Florida; 33 offices in Indianapolis and nearby communities; 26 offices in metropolitan Minneapolis/St. Paul, and one in Duluth, Minn.; 17 offices in the greater St. Louis area; 15 offices in Kansas City and nearby communities; and one office in Las Vegas, Nev. M&I also provides trust and investment management, equipment leasing, mortgage banking, asset-based lending, financial planning, investments, and insurance services from offices throughout the country and on the Internet (www.mibank.com or www.micorp.com).

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