The acquisition, valued at about $5.4 billion, was approved by the Federal Reserve Wednesday. The transaction is expected to be completed by Nov. 1 and M&T will begin converting Hudson City to its network by early next year, the banks said in a joint statement.
The deal repeatedly stalled as the Fed reviewed Buffalo, New York-based M&T’s anti-money-laundering controls. Hudson City has also faced scrutiny from regulators and agreed this month to pay more than $30 million to resolve an investigation by the Justice Department and the Consumer Financial Protection Bureau into allegations of discriminatory lending practices.
The delay, which analysts have called one of the longest in U.S. banking history, has served as a cautionary tale for other lenders seeking to increase in size through acquisitions and has exacerbated a slowdown in deal-making.
M&T has a large footprint in Maryland. With 170 branches in the state, it is the second-largest banking operation in Maryland based on market share, according to data from SNL Financial. In 2014, M&T Bank Corp. had 14.5 percent of deposits, second to Bank of America’s 21.1 percent.
M&T also regularly has been the most active lender in the Small Business Administration program in Maryland.
The acquisition was valued at $3.7 billion in cash and stock when it was announced in August 2012 and has climbed as M&T’s share price increased, according to data compiled by Bloomberg. The combination will create the 14th-largest U.S. commercial bank with combined assets of about $132 billion, according to data compiled by Bloomberg.
“We have reached this milestone thanks to the extremely hard working employees at M&T,” Bob Wilmers, M&T’s chief executive officer, said in the statement. “I am gratified by their commitment to strengthening and sustaining our risk and regulatory compliance programs as we position M&T for future growth.”
The deal could add as much as $1 to M&T’s earnings per share next year, according to Marty Mosby, an analyst Vining Sparks. After spending millions of dollars to improve its internal compliance controls, M&T is well-positioned to make additional purchases, he said. The Fed said Wednesday it expects M&T to refrain from more deals until Hudson City is fully integrated.
“They have the green light to make more acquisitions,” Mosby said. “It was always part of their strategic plan.”
Big bank takeovers are making a comeback after a slowdown brought on by stricter regulations in the wake of the financial crisis. Winston-Salem, North Carolina-based BB&T Corp. has made three purchases in less than a year, most recently agreeing to buy National Penn Bancshares Inc. for $1.8 billion of cash and stock. CIT Group Inc.’s $3.4 billion takeover of OneWest Bank Group LLC was approved by regulators in July.
“This is just the beginning,” said Dick Bove, an analyst at Rafferty Capital Markets. “Midsize bank acquisitions are going to increase meaningfully starting in 2016.”