Things may be looking up for the long awaited merger deal between M&T Bank Corporation MTB and Hudson City Bancorp, Inc. HCBK. According to a regulatory filing on Monday, Hudson City plans to complete the long delayed acquisition by May 1, 2015.
In the filing, the company has informed employee stock-ownership and incentive-bonus plan participants about the blackout period, which is anticipated to start on Apr 21 and end on around May 10. During the blackout period share trading will be temporarily suspended. Notably, the plans cover shares of Hudson City common stock that are to be exchanged for shares of M&T common stock and/or cash in relation to the merger.
“The merger may ultimately occur on a different date, or not at all,” and remains dependent on regulatory approval, Hudson City said in the filing.
Previously, in Dec 2014, the closing date of the proposed merger was further extended to Apr 30, 2015 from the previous deadline of Dec 31, 2014. This was the third time that these two banking entities agreed to extend the deadline for merger completion.
Either of the two companies may terminate the merger agreement if it is still not complete. The companies are hoping that more time will allow them to receive the regulatory approvals for completion of the merger. However, there is no certainty regarding the timing and actual grant of the regulatory approvals. The consideration and exchange ratio as per the merger agreement has been kept unaltered.
Background
In Aug 2012, M&T Bank agreed to take over Hudson City in a cash and stock deal worth $3.7 billion. The deal was projected to fetch M&T Bank around $25 billion in deposits and $28 billion in loans, subject to acquisition accounting adjustments.
However, in Apr 2013, the Federal Reserve detected loopholes in M&T Bank's efforts to fight money laundering and put the acquisition on hold. The U.S. regulatory body had pointed out several discrepancies in M&T Bank’s risk-management agenda that violated federal anti-money-laundering regulations. The Fed also raised questions about M&T Bank's procedures, systems and processes relating to M&T's Bank Secrecy Act and anti-money-laundering compliance program.
The bank was successful in reaching an agreement with the Fed to improve compliance with relation to risky activities. However, in Dec 2013, M&T Bank and Hudson City planned to extend the deal’s closure date from Jan 31, 2014 to Dec 31, 2014.
Bottom-Line
While it cannot be concluded with certainty when the deal will actually be completed, we remain optimistic about M&T Bank’s efforts in gradually addressing the issues raised by the Federal Reserve and hence we hope for the closure of the deal within the latest stipulated time.
However, we remain cautious regarding any possibilities of termination of the long delayed deal. If the agreement fails to materialize, it would pose a threat to Hudson City’s financials and send negative sentiment in the market. Notably, given the delay in the merger with M&T Bank, the company initiated commercial real estate lending and secondary mortgage market operations during first-quarter 2014 as a part of its Strategic Plan adopted to boost the overall performance of the company.
Currently, both M&T Bank and Hudson City carry a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance space include Citigroup Inc. C and KeyCorp. KEY. Both the stocks sport a Zacks Rank #2 (Buy).
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