M&T Joins Regional-Bank Merger Rush With $7.6 Billion Deal

(Bloomberg) -- M&T Bank Corp. agreed to buy People’s United Financial Inc. in an all-stock deal valued at about $7.6 billion, joining a string of U.S. regional banks bulking up in recent months to fend off competition from industry giants.

M&T Chief Executive Officer Rene Jones will lead the combined company, which will have about $200 billion in assets and a network of more than 1,100 branches spanning 12 states from Maine to Virginia, M&T said Monday in a statement.

“The banking environment is very competitive, and we’re trying to figure out how we can get the necessary scale across things like technology, marketing, and at the same time really continue to make improvements,” Jones said in an interview after the acquisition was announced. “That takes a fair amount of investment.”

Read more: M&T gains as analysts praise deal

The tie-up between Buffalo, New York-based M&T and People’s United marks the latest deal among regional banks as they seek size to counter low interest rates, tepid loan demand and the need for greater technology spending. The mergers are aimed at helping smaller firms compete against giants such as JPMorgan Chase & Co., which is moving into new states and spending billions annually on digital offerings.

U.S. lenders approaching an asset size of $250 billion are subject to greater regulatory scrutiny, another reason to combine in order to spread compliance costs.

Among the recent tie-ups: Huntington Bancshares Inc. agreed to buy TCF Financial Corp. for about $6 billion in December, and PNC Financial Services Group Inc. said in November it would pay $11.6 billion for Banco Bilbao Vizcaya Argentaria SA’s banking operations in the U.S., last year’s largest U.S. banking deal.

M&T’s purchase immediately increases the company’s tangible book value, or the value of assets that shareholders would receive in liquidation, by 0.4%, according to Herman Chan, a Bloomberg Intelligence analyst. That makes it cheaper than Huntington Bancshares’ purchase of TCF, which would dilute the metric by 7%.

M&T rose 0.3% to $150.40 at 9:39 a.m. in New York. People’s United, based in Bridgeport, Connecticut, surged 12% to $17.55.

Deal Terms

People’s United investors will receive 0.118 of a share of M&T common stock for each of their shares, according to the statement. The transaction is expected to be completed in the fourth quarter.

The deal will be 10% to 12% accretive to earnings per share in 2023, reflecting estimated annual cost savings of about $330 million, the company said.

M&T shares advanced 18% this year, giving the bank a $19.3 billion market value. People’s United jumped 35%, valuing the company at $7.4 billion. Both stocks outperformed the 9.8% gain in the S&P 500 Financials Index.

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