M&t To Acquire Wilmington Trust For $351 Million

November 01, 2010, 9:22 AM EDT

By Zachary R. Mider

(Adds third-quarter results starting in third paragraph.)

Nov. 1 (Bloomberg) Wilmington Trust Corp., the Delaware bank founded by the du Pont family and undermined by souring loans, agreed to sell itself to M & T Bank Corp. for $351 million in stock, or about half its market value last week.

The deal values 107-year-old Wilmington Trust at $3.84 a share, or 46 percent less than its closing price Oct. 29. Investors will get 0.051 share of Buffalo-based M & T for each Wilmington share, the companies said today in a statement. Wilmington Chief Executive Officer Donald Foley said in a statement it was the best option for our shareholders, as well as our clients and the employees.

Wilmington Trust put itself up for sale as it prepared to report a sixth straight quarterly loss. The firm and its bankers at Lazard Ltd. contacted bigger lenders including M & T, Bank of Montreal and Toronto-Dominion Bank about a takeover, and solicited interest from private-equity investors in making a capital infusion, people with knowledge of the matter have said.

Wilmington said today the third quarter loss widened to $365.3 million from $5.9 million in the year-earlier period and $116.4 in the second quarter. Losses in the past two years were fueled by soured commercial real estate loans and investments in pools of trust-preferred securities. Loans and real estate that aren t receiving interest increased 77 percent in the quarter to $988.6 million from the second quarter, it said.

Combined Strengths

The purchase price values Wilmington Trust at tangible book value, and the acquisition will add to earnings by 2012, M & T said in the statement. Wilmington Trust's wealth management unit, focusing on customers across the U.S. with $10 million or more of liquid assets, managed $25 billion as of June 30.

We are building an even more powerful franchise with strength and stability, scale and density and top-of-class products and services, M & T CEO Robert G. Wilmers said in a statement.

M & T jumped 97 cents to $75.72 in early trading in New York at 9:08 a.m. The lender advanced 12 percent this year through Oct. 29 on the New York Stock Exchange.

T. Coleman du Pont, then president of E.I. du Pont Nemours & Co., founded Wilmington in 1903. It's now widely held. The bank cut its quarterly dividend to one penny last year, and Chief Executive Officer Ted Cecala retired in June after 14 years at the helm.

The U.S. Treasury, through its Troubled Asset Relief Program, bought $330 million in preferred equity in Wilmington Trust in December 2008. M & T said it agreed to assume responsibility for the preferred stock.

In addition to Lazard LTd., Wilmington Trust used Morgan Stanley for a fairness opinion, and got legal counsel from Skadden Arps Slate Meagher & Flom LLP. M & T used Royal Bank of Canada's investment banking unit, and Wachtell Lipton Rosen

To contact the editor responsible for this story: Jennifer Sondag at jsondag[@]bloomberg.net.