M&T Bank buys Wilmington Trust for $351Million

By Janna Herron, AP Business Writer

NEW YORK — M&T Bank (MTB) said Monday that it is paying about $351 million for beleaguered Wilmington Trust Co. of Wilmington, Del., whose loan portfolio has been deteriorating with no end in sight.

Wilmington Trust Chairman and CEO Donald Foley said the board examined numerous alternatives, held talks with a number of potential partners and believes the deal with M&T is the best available option for its stockholders.

Wilmington Trust (WL) investors dumped the stock on Monday. The bank's shares tumbled 66% afternoon trading. Shares of M&T rose 15%.


READ: The banks' joint press release.

The deal comes after Wilmington Trust posted a net loss of $369.9 million in the third quarter due to bad real estate construction loans in Delaware, and the bank said future losses were likely.

Wilmington Trust said it set aside $281.5 million for loan losses, up 37% from the previous quarter. Non-performing assets climbed more than three-quarters to $988.6 million from the second quarter and represented 12% of all loans.

"There is no significant economic or real estate recovery on the horizon in our markets. Therefore, we have little assurance that our loan portfolio will strengthen significantly in the near term, or that our capital position will not erode further," Foley said in the company's earnings statement.

Under terms of the deal, Buffalo-based M&T said Wilmington Trust shareholders will receive 0.051372 shares of M&T stock for each share of Wilmington Trust.

M&T also will take a $500 million fair value adjustment to Wilmington Trust's loan portfolio, following $500 million in write-downs before the deal closes, according to a Standard & Poor's statement on the transaction. That will serve to insulate M&T from continuing losses in the portfolio.

S&P on Monday affirmed M&T's investment-grade ratings and maintained its negative outlook for the ratings after the deal's announcement. The agency also affirmed Wilmington Trust's non-investment grade ratings, but put them on "CreditWatch" with positive implications.

"Although we do not expect any material negative impact from the acquisition, we do expect M&T will continue to undergo normal cyclical weakness in its legacy portfolio," S&P said.

M&T expects to add $8.3 billion in deposits and $8.1 billion in loans after the deal. It will become the 19th largest bank by deposits in the country, up from the 21st biggest, according to research firm SNL Financial. Currently, M&T has $47.3 billion in deposits.

It will operate 800 branches in eight states, Washington, D.C., and Ontario, Canada.

The transaction is expected to close by the mid-2011.

In related news, Allied Irish Bank shareholders debated Monday whether to sell a 22.4% interest in M&T Bank to help prevent it from becoming the fourth Irish bank taken over by the government.

A general meeting at its headquarters was expected to approve the M&T sale through a public offering at $77.50 a share.

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