(Corrects 10th paragraph to show Ted Cecala was former CEO of
Wilmington, not M&T)
* Stock deal values co at $3.84/shr, 46 pct discount
* M&T to repay Wilmington's bailout funds
* Wilmington Q3 loss/shr $4.06 vs $1.33 yr-ago
* Wilmington shares slump 42 pct; M&T up 3.4 pct
By Elinor Comlay
NEW YORK, Nov 1 M&T Bank (MTB.N) has snapped up
troubled Wilmington Trust Corp WL.N, a smaller U.S. regional
bank and wealth manager, which sold itself at a bargain price
after facing soaring loan losses and reporting its sixth
straight quarterly loss.
Shares of Wilmington, which has been battling losses on
commercial mortgages and construction loans, slid more than 40
percent after it announced its planned sale to M&T Bank for
about $351 million in stock.
Buffalo, New York-based M&T bank, which counts Warren
Buffett's Berkshire Hathaway Inc (BRKa.N) among its investors,
has better managed its loan portfolio and has emerged as one of
the stronger U.S. regional banks after the financial crisis.
That strength will help them absorb Delaware-based
Wilmington, said Gary Townsend, chief executive and portfolio
manager at Hill-Townsend Capital.
"They have the wherewithal and the heft, even if they have
to go back into markets and raise some additional capital of
their own," he said.
The deal is a sign there will be further consolidation
among U.S. banks, analysts said, as weaker players struggle
amid higher regulatory costs and continued loan losses, while
larger banks are better able to absorb regulatory costs and are
starting to make new loans again.
"We will see substantially more consolidation and this
takes us in this direction," said Townsend. "It's an example of
what we should expect in the next couple of years.
Buying Wilmington is attractive to M&T because its wealth
management unit has been a steady earner even amid the crisis.
Based on M&T's closing share price on Friday, the deal
values Wilmington shares at $3.84, a 46 percent discount from
their closing price on Friday, but equal to their tangible book
value at the end of September. Wilmington shareholders will get
0.051372 M&T shares for each share they hold.
Wilmington's former chief executive, Ted Cecala, abruptly
retired in June after 31 years at the bank, and director and
former ITT Corp (ITT.N) treasurer Donald Foley stepped in to
lead the bank. Talk emerged in October it was looking to sell
itself and Bloomberg reported Wilmington had approached several
bigger banks. [ID:nSGE69O0JB]
Founded 107 years ago as a manager for the DuPont family
fortune, Wilmington in recent years expanded its lending
business beyond its retail base in Delaware by pairing
commercial lenders with its wealth managers in other states.
On Monday, Wilmington reported a third-quarter loss of
$365.3 million [ID:nASA00XVM]. The company said its
nonperforming assets jumped to $988.6 million, which is just
over 12 percent of its total loans and owned real estate
The bank had to essentially write down expected future tax
benefits by nearly $200 million. These write downs, known as
"deferred tax asset valuation allowances," must be taken if a
company does not expect to generate enough taxable income to
realize future benefits.
In other words, Wilmington Trust's management evidently had
real questions about the company's future profitability.
Regulators have been pressing banks to write these assets down
where appropriate. [ID:nN13463779]
The deal saddles M&T with just over $1 billion to repay in
total bailout money from the U.S. Treasury. M&T executives said
on a call with analysts that they have not begun talking with
regulators about repaying their bailout funds, but expect to do
this next year.
The bank will retain the Wilmington Trust brand for wealth
advisory and corporate services businesses and will pick up 48
branch locations in Delaware. Those locations have no overlap
with its existing branches in the U.S. mid-Atlantic region.
Wilmington's lead financial adviser was Lazard (LAZ.N), and
Morgan Stanley (MS.N) offered a fairness opinion on the deal.
Its legal advisers were Skadden, Arps, Slate, Meagher & Flom.
M&T's financial adviser was RBC Capital Markets. Its legal
adviser was Lipton, Rosen & Katz.
Wilmington shares were down 42.2 percent at $4.11 in
morning trading. M&T shares were up 3.4 percent at $77.35.
(Reporting by Elinor Comlay in New York and Sweta Singh in
Bangalore; Editing by Unnikrishnan Nair, Lisa Von Ahn, Dave