M&T Bank Corp. said Monday it will buy Hudson City Bancorp Inc. in a cash-and-stock deal valued at about $3.7 billion that will broaden its reach in the eastern U.S.
The buyout includes Hudson City’s 135 branch offices located in New York, New Jersey and Connecticut.
The combined company will include 870 branches located in states running from Connecticut to Virginia. In Maryland, M&T has more than 12 percent of the market share.
Both companies’ boards have approved the transaction, which will be the banking industry’s biggest takeover this year. The deal needs approval from both companies’ shareholders.
M&T, based in Buffalo, N.Y., has $80.8 billion in assets. Hudson City, based in Paramus, N.J., has $43.6 billion in assets.
“It’s a very attractive transaction for M&T right off the bat,” said Joseph Fenech, an analyst at Sandler O’Neill & Partners LP in New York, who has a buy rating on M&T’s shares. “If you look up and down the M&T franchise from upstate New York to Virginia, two of the holes were Long Island and New Jersey.”
Each Hudson City share will receive consideration valued at 0.08403 of an M&T share in the form of either M&T stock or cash. The deal values Hudson City about 12 percent higher than the company’s closing price on the Nasdaq Stock Market Friday.
Hudson City’s shares rose $1.01, or nearly 15.7 percent, to close at $7.45 Monday. Shares of M&T gained $3.95, or 4.6 percent, to close at $89.82.
M&T said it expects to receive about $25 billion in deposits and $28 billion in loans from the buyout, prior to acquisition-related accounting adjustments. M&T says this will give it the fourth-biggest deposit share in New Jersey.
M&T said that after the deal closes, it plans to pay back about $13 billion of Hudson City’s long-term borrowings by liquidating its investment portfolio.
M&T expanded in 2011, when it bought Wilmington Trust Corp. for more than $400 million to build market share in Delaware and expand wealth management and corporate services to boost fee income. In 2009, M&T bought Baltimore-based Provident Bankshares Corp. to add deposits in the mid-Atlantic region.
Hudson City was the largest U.S. bank to forgo a government bailout. The lender took an after-tax charge of $440.7 million last year from the early repayment of $4.3 billion of so-called structured putable borrowings. The company said it was under pressure from regulators to reduce risk.