Well, here's an idea that I really had not considered.
Amidst all of the speculation about whether Santander (NYSE: STD) would buy Allied Irish Banks' (NYSE: AIB) stake in M&T Bank (NYSE: MTB) as part of a play to buy all of M&T, Allied Irish took a different path. I had wondered recently whether or not Allied Irish would shop the stake to other banks or whether M&T might band together with Berkshire Hathaway (NYSE: BRK.A) to buy it back from Allied Irish.
Instead, Allied Irish is basically floating the stake into the public markets via a mandatory convertible note that converts into those M&T shares.
It's an interesting move. I am not sure whether it is the best way to maximize the value of that stake for Allied Irish, but it is a relatively quick way of converting that into capital. What's more, it is safe to assume that none of the potential corporate bidders were going to do the deal without a discount, so Allied Irish probably accepted the idea that "fair value" was not going to be full price.
For M&T, this is probably a big load off of their minds - with that stake no longer likely to go to Santander, the near-term pressures to talk about a deal likely dry up. That is not to say that M&T could not still be in play or that Santander suddenly loses interest, but it seems a lot less likely now than before.
Showing posts with label Allied Irish Bank. Show all posts
Showing posts with label Allied Irish Bank. Show all posts
Wednesday, October 6, 2010
Wednesday, September 29, 2010
The Tortured Mating Dance Of M&T and Santander
Even though the right amount of money has a way of smoothing over many differences, it looks like the all-too-logical acquisition of M&T Bank (NYSE:MTB) and Spain's Santander (NYSE:STD) is once again leaning more towards "unlikely" than "likely". With reports out there suggesting that talks once again broke down over an issue of control, it may be time for both parties to move on and pursue strategies that do not involve each other.
The Story So Far
Both Santander and M&T Bank have acknowledged that the two companies have talked about possible combinations, but so far they have not managed to strike a deal. While M&T is a fine target in its own right, it is probable that Santander's interest originated in the struggles of Allied Irish Banks (NYSE:AIB). Allied Irish owns a large chunk of M&T (about 22%), but desperately needs to clean up its balance sheet and raise capital. Consequently, that stake in M&T is pretty much up for bid.
Please click the link to read the whole article:
http://stocks.investopedia.com/stock-analysis/2010/The-Tortured-Mating-Dance-Of-MT-And-Santander-MTB-STD-AIB-HBC-USB-PNC-STI0929.aspx
Correction - Got a very nice email from MTB's head of Corp Comm., who pointed out that MTB has not actually officially/formally responded to any of these rumors/stories. So, I have asked the editors at Investopedia to correct the piece to reflect that.
The Story So Far
Both Santander and M&T Bank have acknowledged that the two companies have talked about possible combinations, but so far they have not managed to strike a deal. While M&T is a fine target in its own right, it is probable that Santander's interest originated in the struggles of Allied Irish Banks (NYSE:AIB). Allied Irish owns a large chunk of M&T (about 22%), but desperately needs to clean up its balance sheet and raise capital. Consequently, that stake in M&T is pretty much up for bid.
Please click the link to read the whole article:
http://stocks.investopedia.com/stock-analysis/2010/The-Tortured-Mating-Dance-Of-MT-And-Santander-MTB-STD-AIB-HBC-USB-PNC-STI0929.aspx
Correction - Got a very nice email from MTB's head of Corp Comm., who pointed out that MTB has not actually officially/formally responded to any of these rumors/stories. So, I have asked the editors at Investopedia to correct the piece to reflect that.
Monday, September 27, 2010
Santander and M&T Bank - Here We Go Again (Again...)
The dealings between Spain's Santander (NYSE: STD) and U.S. bank M&T Bank (NYSE: MTB) are starting to remind me of the cheesy horror movies I loved as a kid. This deal just will not die ... it keeps coming back again and again, only to die at the end of the latest installment.
According to multiple media reports, Santander and M&T had once again been in discussions regarding some sort of merger. And once again, the deal fell apart over an inability to agree on who would run the company.
If these reports are to be believed, M&T's CEO Robert Williams actually had the chutzpah to insist that his team run the combined entity. Keep in mind, Santander is 10 TIMES the size of M&T. Although Santander was apparently willing to consider letting them run Sovereign Bank (that is Santander's U.S. operation and the likely "home" for M&T if a deal happens), that was not acceptable to MTB.
The fact that this keeps coming up shows that Santander is indeed keen to do this deal; helped no doubt by the reality that Allied Irish Banks (NYSE: AIB) is very much in trouble and needs to sell its large stake in M&T Bank. It seems equally clear, though, that M&T management does not want to let go of the reins and sell the company.
Who knows how much longer this is all going to go on? I have to imagine that M&T would dearly love for AIB to find another more-or-less silent partner that would take that 22.5% stake and just be content with that. Unfortunately, non-controlling stakes in foreign banks have burned many of the major European banks and there is likely a shortage of volunteers to try again.
Likewise, I am beginning to wonder if Santander needs to move on to a new target. M&T is a well-run bank, but you can only pine for the girl of your dreams for so long before you need to get on with life. If Santander could find a more willing partner in PNC (NYSE: PNC), BB&T (NYSE: BBT), or SunTrust (NYSE: STI), maybe they ought to explore that.
Ultimately, this deal does make financial sense for both sides. Unfortunately, there are issues of ego and non-financial factors that seem to be very difficult to surmount. Given the track record of M&T management, MTB shareholders should not be in any great hurry (the "down side" to no deal is that it is still an excellent independent bank). Likewise, Santander should not be so keen on M&T that they ignore other high-quality (and perhaps more willing) partners.
Disclosure - I own shares of BBT
Update - Other sources are indicating that the debate about post-merger control has to do only with Sovereign; whether M&T management would control the combined Sovereign + MTB bank or whether it would be the current team. That certainly makes a great deal more sense than my initial read (thinking that MTB wanted control of all of STD).
According to multiple media reports, Santander and M&T had once again been in discussions regarding some sort of merger. And once again, the deal fell apart over an inability to agree on who would run the company.
If these reports are to be believed, M&T's CEO Robert Williams actually had the chutzpah to insist that his team run the combined entity. Keep in mind, Santander is 10 TIMES the size of M&T. Although Santander was apparently willing to consider letting them run Sovereign Bank (that is Santander's U.S. operation and the likely "home" for M&T if a deal happens), that was not acceptable to MTB.
The fact that this keeps coming up shows that Santander is indeed keen to do this deal; helped no doubt by the reality that Allied Irish Banks (NYSE: AIB) is very much in trouble and needs to sell its large stake in M&T Bank. It seems equally clear, though, that M&T management does not want to let go of the reins and sell the company.
Who knows how much longer this is all going to go on? I have to imagine that M&T would dearly love for AIB to find another more-or-less silent partner that would take that 22.5% stake and just be content with that. Unfortunately, non-controlling stakes in foreign banks have burned many of the major European banks and there is likely a shortage of volunteers to try again.
Likewise, I am beginning to wonder if Santander needs to move on to a new target. M&T is a well-run bank, but you can only pine for the girl of your dreams for so long before you need to get on with life. If Santander could find a more willing partner in PNC (NYSE: PNC), BB&T (NYSE: BBT), or SunTrust (NYSE: STI), maybe they ought to explore that.
Ultimately, this deal does make financial sense for both sides. Unfortunately, there are issues of ego and non-financial factors that seem to be very difficult to surmount. Given the track record of M&T management, MTB shareholders should not be in any great hurry (the "down side" to no deal is that it is still an excellent independent bank). Likewise, Santander should not be so keen on M&T that they ignore other high-quality (and perhaps more willing) partners.
Disclosure - I own shares of BBT
Update - Other sources are indicating that the debate about post-merger control has to do only with Sovereign; whether M&T management would control the combined Sovereign + MTB bank or whether it would be the current team. That certainly makes a great deal more sense than my initial read (thinking that MTB wanted control of all of STD).
Tuesday, September 14, 2010
Allied Irish Banks Tries To Avoid Trouble
Irish literature and music is full of tales of trouble, sorrow and woe, and Allied Irish Banks (NYSE:AIB) is trying hard not to become part of that canon. Allied Irish has been walloped by the same overheated markets and poor underwriting decisions that have hammered many Western banks, and Allied Irish is scrambling to shore up its capital. Although asset sales will help, Allied Irish could be in for a long slog as what the company needs most of all is a healthy operating environment, and that looks to be a ways off.
A Housing Bubble Taken to "11"
Once called the "Celtic tiger", Ireland hit the rocks harder than most other Western economies. Not only were there bubbles in residential and commercial real estate, but the export-driven economy has taken a serious hit from the decline in demand throughout Europe. Allied Irish found itself in a situation where it had become dependent upon wholesale funding to fill the gap between loan demand and deposit supply, and then found its loan book going very bad very quickly. Even though Ireland has set up a government-sponsored "bad bank" to take on bad loans, Allied Irish still saw one-quarter of its loans in some state of concern at the end of its June quarter. AIB reports credit in "watch", "vulnerable" and "impaired" categories, and the 25% refers to the combination of all three. (For more on housing bubbles, check out 5 Steps Of A Bubble.)
To read the complete piece, please continue on to:
http://stocks.investopedia.com/stock-analysis/2010/Allied-Irish-Banks-Tries-To-Avoid-Trouble-AIB-STD-MTB-USB-PNC-WFC-BAC0914.aspx
A Housing Bubble Taken to "11"
Once called the "Celtic tiger", Ireland hit the rocks harder than most other Western economies. Not only were there bubbles in residential and commercial real estate, but the export-driven economy has taken a serious hit from the decline in demand throughout Europe. Allied Irish found itself in a situation where it had become dependent upon wholesale funding to fill the gap between loan demand and deposit supply, and then found its loan book going very bad very quickly. Even though Ireland has set up a government-sponsored "bad bank" to take on bad loans, Allied Irish still saw one-quarter of its loans in some state of concern at the end of its June quarter. AIB reports credit in "watch", "vulnerable" and "impaired" categories, and the 25% refers to the combination of all three. (For more on housing bubbles, check out 5 Steps Of A Bubble.)
To read the complete piece, please continue on to:
http://stocks.investopedia.com/stock-analysis/2010/Allied-Irish-Banks-Tries-To-Avoid-Trouble-AIB-STD-MTB-USB-PNC-WFC-BAC0914.aspx
Tuesday, July 27, 2010
A Tale Of 3 Banks
Three notable banks - U.S. Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC) and M&T Bank (NYSE:MTB) - all reported earnings last Wednesday. As has been the case throughout this earnings season, there were a lot of moving parts in all of these reports, but a few trends seem to be common across the sector. Banks are seeing improvement in net interest income, minimal loan growth, and tentatively improving credit quality.
The Tale of Tables
To simplify some of the comparisons, I am providing some of the reported financial information in the following tables. Please note that there is "wiggle room" in bank financial reports, and not all analysts will adjust the numbers in the same way, so there could be a bit of variability in the numbers, but I applied the same formulas in all cases, so the comparisons should remain valid.
For the full piece, please click below:
http://stocks.investopedia.
The Tale of Tables
To simplify some of the comparisons, I am providing some of the reported financial information in the following tables. Please note that there is "wiggle room" in bank financial reports, and not all analysts will adjust the numbers in the same way, so there could be a bit of variability in the numbers, but I applied the same formulas in all cases, so the comparisons should remain valid.
For the full piece, please click below:
http://stocks.investopedia.
Tuesday, July 20, 2010
How About Santander & BB&T?
Ok, I know there is plenty of real news right now and I probably should not be spending my time on idle speculation. I also know rumors are a dime a dozen, and I really do not want to be involved in starting any myself. But I find myself wondering whether Spain's Santander (NYSE: STD) would think of having a go at BB&T (NYSE: BBT).
First, let me start by saying that I own BB&T, so I certainly have a personal financial interest in this notion.
I think it is pretty clear that Santander is not finished acquiring assets, and it is equally clear that they want to expand their U.S. operations. The company has been trying to find a way to reach a deal with Buffalo-based M&T Bank (NYSE: MTB), in part by acquiring Allied Irish Bank's (NYSE: AIB) stake in MTB. That said, MTB does not appear to want to sell out to Santander beyond AIB's stake. So we have an impasse there.
But what about BB&T? Although BB&T has large operations in Georgia (one of the sinkholes in the credit crisis) and a large commercial real estate portfolio, BBT has thus far done pretty well throughout the crisis and the bank has a well-earned reputation for both sound and conservative management. BBT management is also on record saying that they will need to make transformational M&A maneuvers in the coming years, and I do not believe the Colonial deal was what they meant.
BBT would give Santander access to a faster-growing area of the country (faster than the Mid-Atlantic), a large deposit base, and a profitable insurance business. The Southeast is also an area seeing significant Hispanic immigration and that might be synergistic for Santander given their operations in Mexico and Latin America.
It also does not hurt that BBT is undervalued right now and could be a cheaper "get" than MTB.
Of course, Santander has ample options - including simply standing pat and growing organically. If Santander wants to grow in the Southeast, Suntrust (NYSE: STI) is an option as well, and so to Regions Financial (NYSE: RF). And who knows? Maybe they go to Texas for Texas Capital Bancshares (Nasdaq: TCBI), or the western US for Zions (Nasdaq: ZION) or the upper midwest for TCF (NYSE: TCB). So on and so on - which is why I do not like speculating on these things; you can do it all day and get nowhere.
Still, I find the idea of a Santander-BBT link-up to be intriguing. I am a fan of both banks and have thought about purchasing Santander relatively recently. If I was not already over-exposed to finance, I probably would have by now. Nevertheless, time will tell ...
Disclosure - I own shares of BBT
First, let me start by saying that I own BB&T, so I certainly have a personal financial interest in this notion.
I think it is pretty clear that Santander is not finished acquiring assets, and it is equally clear that they want to expand their U.S. operations. The company has been trying to find a way to reach a deal with Buffalo-based M&T Bank (NYSE: MTB), in part by acquiring Allied Irish Bank's (NYSE: AIB) stake in MTB. That said, MTB does not appear to want to sell out to Santander beyond AIB's stake. So we have an impasse there.
But what about BB&T? Although BB&T has large operations in Georgia (one of the sinkholes in the credit crisis) and a large commercial real estate portfolio, BBT has thus far done pretty well throughout the crisis and the bank has a well-earned reputation for both sound and conservative management. BBT management is also on record saying that they will need to make transformational M&A maneuvers in the coming years, and I do not believe the Colonial deal was what they meant.
BBT would give Santander access to a faster-growing area of the country (faster than the Mid-Atlantic), a large deposit base, and a profitable insurance business. The Southeast is also an area seeing significant Hispanic immigration and that might be synergistic for Santander given their operations in Mexico and Latin America.
It also does not hurt that BBT is undervalued right now and could be a cheaper "get" than MTB.
Of course, Santander has ample options - including simply standing pat and growing organically. If Santander wants to grow in the Southeast, Suntrust (NYSE: STI) is an option as well, and so to Regions Financial (NYSE: RF). And who knows? Maybe they go to Texas for Texas Capital Bancshares (Nasdaq: TCBI), or the western US for Zions (Nasdaq: ZION) or the upper midwest for TCF (NYSE: TCB). So on and so on - which is why I do not like speculating on these things; you can do it all day and get nowhere.
Still, I find the idea of a Santander-BBT link-up to be intriguing. I am a fan of both banks and have thought about purchasing Santander relatively recently. If I was not already over-exposed to finance, I probably would have by now. Nevertheless, time will tell ...
Disclosure - I own shares of BBT
Monday, July 12, 2010
Santander Keeps Building Assets
The more I keep researching and reading about Santander (NYSE: STD), the more interesting this global bank gets. I am still not completely certain that Santander will succeed in reaching a deal with M&T Bank (NYSE: MTB) or even reach a deal with Allied Irish Bank (NYSE: AIB) for its stake in MTB, but there are always other interesting fish in the see.
Last month, Santander paid $2.5 billion to acquire Bank of America's (NYSE: BAC) 25% stake in Santander Mexico. Bank of America originally paid Santander about $1.6 billion for that stake in late 2002, so that is not a bad return on investment. With the deal, Santander took full control of its Mexican operations, but the deal did not change earnings or capital all that much.
And now today Santander is at it again - paying close to $700M to Swedish bank SEB for its German commercial banking business. This move will not have a major impact on Santander's earnings or returns, but it will double the company's German branch count.
That is two deals in two months to expand banking operations in places where Santander already has a foothold and where business conditions are relatively good. True, Mexico has taken a hit during this recession and Germany is at risk from contagion in Europe, but they are still attractive banking markets. Moreover, Santander had a little competition for this latest deal (supposedly from Italy's Unicredito), so that at least suggests some positive signs of life in the overall marketplace.
What next for Santander? I would expect them to invest more heavily in Peru and Colombia. I would also expect them to do more deals in the United States. They have been curiously quiet in the US of late. While banks ranging from JPMorgan (NYSE: JPM) to BB&T (NYSE: BBT) to PNC (NYSE: PNC) stepped up to acquire failed or severely stressed banks, Santander has been quiet. Sooner or later, I have to assume that changes - if they cannot do a deal with M&T, do they look at other options like Regions (NYSE: RF), Fifth Third (Nasdaq: FITB), Suntrust (NYSE: STI) and so on?
And what about other areas? Canada is not quite as free-wheeling as the United States, but it is an attractive market. And then there is Africa and Asia - a company with Santander's experience in developing economies could probably do well in these regions.
I guess we will just have to wait and see. In the meantime, I do not see these two deals getting in the way of any U.S. strategy the company may desire - they still have the resources to buy MTB if they wish, though I suppose all parties involved will at least wait for the results of the Europe-wide stress tests (due to come out later this month).
Disclosure - I own share of JPMorgan and BBT
Last month, Santander paid $2.5 billion to acquire Bank of America's (NYSE: BAC) 25% stake in Santander Mexico. Bank of America originally paid Santander about $1.6 billion for that stake in late 2002, so that is not a bad return on investment. With the deal, Santander took full control of its Mexican operations, but the deal did not change earnings or capital all that much.
And now today Santander is at it again - paying close to $700M to Swedish bank SEB for its German commercial banking business. This move will not have a major impact on Santander's earnings or returns, but it will double the company's German branch count.
That is two deals in two months to expand banking operations in places where Santander already has a foothold and where business conditions are relatively good. True, Mexico has taken a hit during this recession and Germany is at risk from contagion in Europe, but they are still attractive banking markets. Moreover, Santander had a little competition for this latest deal (supposedly from Italy's Unicredito), so that at least suggests some positive signs of life in the overall marketplace.
What next for Santander? I would expect them to invest more heavily in Peru and Colombia. I would also expect them to do more deals in the United States. They have been curiously quiet in the US of late. While banks ranging from JPMorgan (NYSE: JPM) to BB&T (NYSE: BBT) to PNC (NYSE: PNC) stepped up to acquire failed or severely stressed banks, Santander has been quiet. Sooner or later, I have to assume that changes - if they cannot do a deal with M&T, do they look at other options like Regions (NYSE: RF), Fifth Third (Nasdaq: FITB), Suntrust (NYSE: STI) and so on?
And what about other areas? Canada is not quite as free-wheeling as the United States, but it is an attractive market. And then there is Africa and Asia - a company with Santander's experience in developing economies could probably do well in these regions.
I guess we will just have to wait and see. In the meantime, I do not see these two deals getting in the way of any U.S. strategy the company may desire - they still have the resources to buy MTB if they wish, though I suppose all parties involved will at least wait for the results of the Europe-wide stress tests (due to come out later this month).
Disclosure - I own share of JPMorgan and BBT
Wednesday, June 23, 2010
A Little More On Santander And M&T Bank
Just a quick little follow-up on the rumor of a get-together between Spain's Santander (NYSE: SAN) and super-regional M&T Bank (NYSE: MTB).
There was news a couple of days ago that Santander was looking to restart talks with M&T management about the possibility of a deal. If the news reports are accurate, the problem is pretty fundamental - M&T does not want to sell and/or give up control to Santander. Given the history of the M&T, the long tenure of senior management, the significant employee ownership, and the whole culture of the bank (as best an outsider like myself can sense), this is not really a surprise.
In other words, Santander is probably welcome to buy Allied Irish Bank's (NYSE: AIB) stake in M&T, but Santander will be expected to operate under similar strictures as AIB - namely, can you offer some suggestions and we won't dilute your interests, but we're not interested in being your subsidiary.
If Santander pushes the matter, they likely will fail. About 20% of M&T is owned by employees, another 5% by Berkshire Hathaway (NYSE: BRK-A), and the 22% or so held by AIB. Assuming AIB has the option to side with M&T management, it is pretty much a non-starter for Santander, and I have to imagine that AIB has other options to monetize their stake if they really wish to pursue them (in other words, I don't think AIB turns over on M&T to make a buck).
I still think Santander is a decent suitor at the right price; I don't think they will ruin M&T and I think there's a fair chance that they would put M&T at the head of their US operations (maybe to the detriment of US-based, Santander-owned Sovereign Bancorp). All in all, Santander is a very good bank and while it may not have quite the same culture as M&T, Santander's relative conservatism has helped them muddle through this credit crisis better than most.
What if the deal doesn't happen? M&T will pretty much continue on as before, growing at a modest organic pace and perhaps considering strategic deals here and there. Santander, though, is not likely to quit. Whether they would look to go large (say, Suntrust (NYSE: STI) or PNC (NYSE: PNC)) or more moderate (deals the size of Fifth Third (Nasdaq: FITB) or Comerica (NYSE: CMA), for instance), I don't think Santander is done building its U.S. business just yet.
There was news a couple of days ago that Santander was looking to restart talks with M&T management about the possibility of a deal. If the news reports are accurate, the problem is pretty fundamental - M&T does not want to sell and/or give up control to Santander. Given the history of the M&T, the long tenure of senior management, the significant employee ownership, and the whole culture of the bank (as best an outsider like myself can sense), this is not really a surprise.
In other words, Santander is probably welcome to buy Allied Irish Bank's (NYSE: AIB) stake in M&T, but Santander will be expected to operate under similar strictures as AIB - namely, can you offer some suggestions and we won't dilute your interests, but we're not interested in being your subsidiary.
If Santander pushes the matter, they likely will fail. About 20% of M&T is owned by employees, another 5% by Berkshire Hathaway (NYSE: BRK-A), and the 22% or so held by AIB. Assuming AIB has the option to side with M&T management, it is pretty much a non-starter for Santander, and I have to imagine that AIB has other options to monetize their stake if they really wish to pursue them (in other words, I don't think AIB turns over on M&T to make a buck).
I still think Santander is a decent suitor at the right price; I don't think they will ruin M&T and I think there's a fair chance that they would put M&T at the head of their US operations (maybe to the detriment of US-based, Santander-owned Sovereign Bancorp). All in all, Santander is a very good bank and while it may not have quite the same culture as M&T, Santander's relative conservatism has helped them muddle through this credit crisis better than most.
What if the deal doesn't happen? M&T will pretty much continue on as before, growing at a modest organic pace and perhaps considering strategic deals here and there. Santander, though, is not likely to quit. Whether they would look to go large (say, Suntrust (NYSE: STI) or PNC (NYSE: PNC)) or more moderate (deals the size of Fifth Third (Nasdaq: FITB) or Comerica (NYSE: CMA), for instance), I don't think Santander is done building its U.S. business just yet.
Subscribe to:
Posts (Atom)