Banking Competition Likely to Heighten With M&T Bank Corporation (MTB) – Hudson City Bancorp, Inc. (HCBK) Merger

In late August of 2012, Buffalo, New York-based M&T Bank Corporation (NYSE:MTB) announced its intention to purchase Jersey City, New Jersey-based Hudson City Bancorp, Inc. (NASDAQ:HCBK) in a cash-and-stock deal valued at approximately $3.7 billion. The deal now appears likely to go through during the second quarter of 2013. Although it is subject to a customary regulatory investigation as well as approval votes by shareholders from both companies, it appears unlikely that these obstacles will scuttle or delay the deal.

About M&T Bancorp and Hudson City Bancorp

M&T Bancorp is a major commercial, thrift, and savings bank that operates hundreds of branches in the northeastern United States and Southeastern Canada. The company provides commercial and consumer lending services, including development loans, mortgages, and various refinancing products. It also operates deposit accounts, savings vehicles, wealth management services, and ATMs for its retail customers. Although M&T may resell its mortgages on the open market, it was not materially affected by the U.S. housing crisis. In addition to its lending and deposit services, M&T Bancorp also issues credit cards and insurance products to its retail and business customers. In 2012, the company earned $953.4 million on $4.1 billion in gross revenues.

Hudson City Bancorp is a smaller thrift bank that operates primarily in the Greater New York City region. The company focuses its deposit-account and lending infrastructure on retail and small-business customers. Like M&T, it issues mortgages, auto loans, business loans, personal credit lines and other straightforward credit facilities. The company also maintains a wealth management division that caters to retirement investors and independently-wealthy clients. It has nearly 140 branches in New York, New Jersey, and Connecticut. With about 1,500 full-time employees on its payroll, Hudson City Bancorp reported 2012 earnings of $249.1 million on gross revenues of $770.4 million.

How the Deal Is Structured

Under the terms of the proposed merger, Hudson City Bancorp shareholders have two distinct choices. First, they can elect to receive per-share cash payments equivalent to the value of .08403 share of M&T stock over a 30-day averaging period. Alternatively, shareholders can elect to receive M&T shares in accordance with the same ratio. M&T has stated that the deal’s cash component cannot exceed 40 percent of its total value. In other words, some Hudson City shareholders may have to accept stock transfers against their will. In addition, this arrangement ties the final value of the deal to M&T’s stock price.