BMO Financial Group said Friday that it would buy Marshall & Ilsley for about $4.1 billion in a stock-for-stock deal, strengthening its position in the U.S. Midwest and more than doubling its U.S. branch network. BMO Financial, which also includes U.S.-based Harris Bank, said the deal with the Wisconsin-based regional lender calls for each share of M&I to be exchanged for 0.1257 of a share of BMO.
Based on BMO's [BMO 57.65 
-4.01 (-6.5%) 
] closing price of C$62.05 on the Toronto Stock Exchange on Thursday, the transaction values each share of M&I at $7.75. That represents a premium of 33.9 percent on M&I's [MI 6.9101 
1.1201 (+19.35%) ] Thursday close on the New York Stock Exchange. Get real time quotes for BMO Financial and Marshall & Ilsley here.
-4.01 (-6.5%) ] closing price of C$62.05 on the Toronto Stock Exchange on Thursday, the transaction values each share of M&I at $7.75. That represents a premium of 33.9 percent on M&I's [MI 6.9101 1.1201 (+19.35%) ] Thursday close on the New York Stock Exchange. Get real time quotes for BMO Financial and Marshall & Ilsley here.Bank of Montreal is Canada's fourth largest, while M&I is the biggest bank in Wisconsin. The deal would create the 15th-largest banking group by assets in United States, BMO said.
BMO said it would raise about C$800 million ($792 million) in additional equity before the completion of the acquisition.
"The acquisition is consistent with our strategy to strengthen our North American businesses," Bill Downe, chief executive of BMO Financial, said in a statement.
"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."
Many Canadian banks, which emerged from the global financial crisis in much stronger shape than their rivals in other countries, are now looking for growth opportunties beyond Canada's borders. The United States, with its weakened banking sector, is a key target.
Milwaukee-based M&I has 374 branches and about $52 billion in assets, compared with 321 BMO branches in the United States and $110 billion.
BMO said the deal was expected to generate annual cost savings of about C$250 million, which would be fully phased in by the end of fiscal 2013.
As part of the agreement, BMO said it would purchase M&I's Troubled Asset Relief Program preferred shares at par plus accrued interest, with full repayment to the U.S. Treasury immediately prior to closing.
BMO would also purchase M&I's existing warrants held by the U.S. Treasury.
