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 Sovereign Bank. Show all posts
Showing posts with label Sovereign 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).
Thursday, June 17, 2010
M&T and Santander ... This Could Actually Make Sense
Rumor going around is that Spanish banking giant Santander (NYSE: STD) may consider a bid for the exceptionally well-run M&T Bank (NYSE: MTB). If this happens to be true, it is a deal I would probably like ... at the right price, of course.
For those not familiar with it, MTB is a Buffalo-based bank with operations across the Mid-Atlantic. While the return on equity and return on assets do not immediately jump out as top-tier, it is widely considered one of the best-run banks in the country. I happen to share that opinion, and would group it along with the likes of US Bancorp (NYSE: USB) and BB&T (NYSE: BBT) as some of the best-run banks in the country. As such, they have not been hurt quite so badly by the housing/credit boom and bust.
What makes this an intriguing deal is that Santander is also an exceptionally well-run bank, even if it carries the "Scarlet S" of being a Spanish bank. Santander gets about 25% of its profits from Spain, with 21% coming from Brazil, 14% from "other" Latin American countries, 12% from the UK, but only a tiny bit (about 2%) from its US business (from its acquisition of Sovereign a few years back). Although the U.S. is not an under-banked market by any means, it is a profitable one and it is reasonable to think STD would have interest.
The opening for Santander is coming, ironically enough, from problems at another large European bank. MTB is 25%-owned by Allied Irish Banks (NYSE: AIB), a good-enough bank when times were good in Ireland. Times are not nearly so good now, though, and AIB is under pressure to raise capital. With MTB shares near a 52-week high, selling that stake could be a very appealing means of generating that needed capital.
Ahhh, but now for the "but". In this case, the "but" is valuation. Even if I stretch some of my assumptions about future growth, I have a tough time going above $100 per share in fair value. Given the restrictions on moving deposits across borders (collecting deposits in Buffalo to fund loans in Buenos Aires is frowned upon), there would not be a lot of synergies for Santander. So, the question for me is whether Santander can basically position AIB over the barrel and strike a bargain price on the stake (as large blocks of stock often move at discounts, similar to public share offerings), and use some of that to offset the takeover premium it will have to pay to buy a controlling stake.
Then again, that assumes that Santander wants, or feels it needs, full control. They could, conceivably be content with just holding that sizable stake and cashing dividend checks.
Personally, I don't think this deal happens I'm coming around to the idea that this deal eventually gets done. It makes sense, but I'm not sure Santander is in a position to do anything quite so bold, and I'm not sure AIB wants to let go of its MTB stake if it has other options to avoid it. Still, should the deal happen, it has the advantage of being a combination of two very well-run banks. As it stands now, Santander is a stock that is definitely on my watch list whether the deal happens or not.
I wrote that prior paragraph last night, and after sleeping on it, I'm changing my mind. I think the odds of a deal are at least 50-50. Santander has a lot of pressures at home and the capital stress tests going on in Europe now might limit just how bold Santander can be. Nevertheless, AIB will have almost no choice but to sell its stake and Santander is clearly interested in expanding its U.S. footprint. If the deal happens, it's a marriage of two very well-run banks. But even if the deal does not go off, I would be happy owning either bank. As it stands now, Santander looks cheap and it is definitely on my watch list.
Full disclosure - I own share of BBT
In the original posting I forgot to mention that M&T and Santander have talked before about a merger. I apologize for not mentioning that as it certainly ups the odds of a transaction.
For those not familiar with it, MTB is a Buffalo-based bank with operations across the Mid-Atlantic. While the return on equity and return on assets do not immediately jump out as top-tier, it is widely considered one of the best-run banks in the country. I happen to share that opinion, and would group it along with the likes of US Bancorp (NYSE: USB) and BB&T (NYSE: BBT) as some of the best-run banks in the country. As such, they have not been hurt quite so badly by the housing/credit boom and bust.
What makes this an intriguing deal is that Santander is also an exceptionally well-run bank, even if it carries the "Scarlet S" of being a Spanish bank. Santander gets about 25% of its profits from Spain, with 21% coming from Brazil, 14% from "other" Latin American countries, 12% from the UK, but only a tiny bit (about 2%) from its US business (from its acquisition of Sovereign a few years back). Although the U.S. is not an under-banked market by any means, it is a profitable one and it is reasonable to think STD would have interest.
The opening for Santander is coming, ironically enough, from problems at another large European bank. MTB is 25%-owned by Allied Irish Banks (NYSE: AIB), a good-enough bank when times were good in Ireland. Times are not nearly so good now, though, and AIB is under pressure to raise capital. With MTB shares near a 52-week high, selling that stake could be a very appealing means of generating that needed capital.
Ahhh, but now for the "but". In this case, the "but" is valuation. Even if I stretch some of my assumptions about future growth, I have a tough time going above $100 per share in fair value. Given the restrictions on moving deposits across borders (collecting deposits in Buffalo to fund loans in Buenos Aires is frowned upon), there would not be a lot of synergies for Santander. So, the question for me is whether Santander can basically position AIB over the barrel and strike a bargain price on the stake (as large blocks of stock often move at discounts, similar to public share offerings), and use some of that to offset the takeover premium it will have to pay to buy a controlling stake.
Then again, that assumes that Santander wants, or feels it needs, full control. They could, conceivably be content with just holding that sizable stake and cashing dividend checks.
I wrote that prior paragraph last night, and after sleeping on it, I'm changing my mind. I think the odds of a deal are at least 50-50. Santander has a lot of pressures at home and the capital stress tests going on in Europe now might limit just how bold Santander can be. Nevertheless, AIB will have almost no choice but to sell its stake and Santander is clearly interested in expanding its U.S. footprint. If the deal happens, it's a marriage of two very well-run banks. But even if the deal does not go off, I would be happy owning either bank. As it stands now, Santander looks cheap and it is definitely on my watch list.
Full disclosure - I own share of BBT
In the original posting I forgot to mention that M&T and Santander have talked before about a merger. I apologize for not mentioning that as it certainly ups the odds of a transaction.
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