Santander, M&T Bank Renew Merger Talks

Santander has rekindled talks in recent weeks with M&T Bank over a merger of the US operations of the Spanish lender with the regional bank based in Buffalo, New York.

Santander House
Sharon Lorimer
Santander House

The talks about combining Santander’s US unit, known as Sovereign, with M&T had collapsed in May,, within weeks of a planned announcement. Discussions faltered over which bank would control the enlarged business.

However, the two banks have again started exploring a deal over the summer and have sounded out regulators, including the Federal Reserve, on their views of a possible transaction, according to people familiar with the matter.

The banks and their advisers have yet to resolve the question of who would control the combined business, those people added. As such, it remains uncertain whether the pair will reach an agreement.

Santander and M&T , which has a market capitalization of about $10 billion, declined to comment.

The deal under discussion earlier in the year, for which terms were never finalized, would have seen M&T acquire Sovereign in a stock-based transaction, creating a business with some $150bn in assets and more than 1,500 branches in the north-east of the US.

Santander would then have increased its stake in the new bank by buying the 22.5 percent stake in M&T owned by Allied Irish. The Irish bank must sell its stake to comply with demands from European regulators.

Santander could also have injected some cash into the enlarged bank.

The Spanish bank is keen to expand its presence in the US. However, Emilio Botín, Santander’s chairman, has expressed reluctance to invest through minority positions, after the bank’s experience with Sovereign.

The bank initially took a 25 per cent stake in Sovereign, as part of a strategic partnership, before agreeing to buy the remainder of the troubled bank in 2008. Sovereign now has more than $80bn in assets around New England.

Santander was willing to take a minority stake in a combined M&T-Sovereign, but wanted a “path to control”, people close to the situation said earlier this year. M&T, however, resisted that notion.

M&T, which has $68bn in assets and 750 branches in New York, Pennsylvania and Maryland, wanted to maintain control of the combined entity.

Shares in M&T, which counts Warren Buffett as a large shareholder, have risen about 27 percent this year. The stock on Monday gained 0.12 per cent to $85.45, giving the bank a market value of more than $10 billion.

The bank has yet to repay $600 million in funds to the US Treasury from the Troubled Asset Relief Program, known as Tarp.