BMO buys U.S. bank for $4.1B

The Bank of Montreal has expanded its U.S. presence by about 50 per cent with the$4.1-billion US purchase of Marshall & Ilsley Corp. ofMilwaukee, Wis.

The Canadian bank will pay for Marshall by issuing stock to Marshall shareholders, it announced Friday.

Investors took the news badly. The bank's stock fell $4.05 or 6.5 per cent to $58 inTSX trading.

Rating agency Moody's Investor Services said it may downgradeBMO debt because of potential problems integrating Marshall and issues with Marshall's asset quality, media reports said.

Marshall has 192 offices in Wisconsin, and about 180 in Arizona, Florida, Indianapolis, Minneapolis/St. Paul, St. Louis, Kansas City and other locations.

BMO said that once the deal closes, expected next summer, its U.S. assets will jump to $162 billion from thecurrent $110 billion. Its U.S. branches will more than double to 695 from 321.

The deal will help BMO profit in 2013, "excluding one-time merger and integration costs of approximately $540 million Cdn," the bank said in a news release.

BMO also said it will raise about $800 million before the deal closes by selling shares.

Based on bank'sclosing price of$62.05 on the TSX Thursday, the takeover values each Marshall share $7.75 US, compared with its New York closing price of $5.79 on Thursday.