Shareholders of the US-based M&T bank have cleared the way for its acquisition of AIB's Allfirst subsidiary.
M&T's shareholders yesterday approved the issuance of 26.7 million of its shares and the payment of $886 million (€864 million) to AIB in exchange for all of the stock of Allfirst.
AIB shareholders will today be asked to approve the deal, which will give the Irish bank a 22.5 per cent stake in the upstate New York bank. The move will make AIB the single biggest M&T shareholder.
Berkshire Hathaway, the vehicle operated by one of the world's most respected investors, Mr Warren Buffett, owns 5.7 per cent of the bank. When the deal is completed Allfirst will be merged with, and become part of, M&T.
Shareholders in M&T also authorised an amendment to the bank's certificate of incorporation to provide that certain provisions, relating to rights granted to AIB under the deal, may only be amended by unanimous board consent or a "supermajority" vote of M&T's shareholders. This will become effective if the acquisition is completed.
They also authorised a further amendment to increase the number of M&T shares from 150 million to 250 million which will be effective regardless of whether the deal is concluded.
If approved by AIB shareholders today the merger will then have to be sanctioned by regulators and could be completed in the first quarter of next year.
The deal will mark a significant expansion for M&T giving it 700 offices in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware and Washington DC. When combined with Allfirst it will have assets of $46 billion and will become one of the 20 biggest US banks.
The deal is likely to be supported by AIB shareholders, many of whom had been disappointed with Allfirst's poor performance in recent years before the $691.2 million fraud was announced in February.
In the wake of the fraud some of the large institutional investors had given the bank one year to knock Allfirst into shape with a view to selling it. The M&T deal has been positively received since it was announced in October, particularly as it gives AIB shareholders an opportunity to participate in the growth of the well regarded US bank.
Allfirst branches will be rebranded M&T. The banks expect the merger to yield cost savings of $100 million, $60 million of which will be delivered next year.
AIB intends to use $450 million of the cash payment from M&T to buy back its own shares so it is not left with surplus capital on its balance sheet, which could depress the share price.
