Robert G. Wilmers has delivered a robust endorsement of M&T Bank’s planned merger with Hudson City Bancorp, despite the long wait for approval.
“Time and circumstance may have altered the route, but not the desired destination,” Wilmers, M&T’s chairman and CEO, said at the bank’s annual shareholders meeting Tuesday in downtown Buffalo. “This is a merger we will continue to pursue with our full might and mettle.”
The process has tested the resolve of both banks. The merger was announced in August 2012, but stalled as Buffalo-based M&T has been upgrading its anti-money laundering and Bank Secrecy Act systems to satisfy federal regulators.
On four occasions, the two banks have extended a deadline after which either party could walk away without a financial penalty. But the end may finally be in sight. While not promising approval, the Federal Reserve has indicated that it will review the merger application by Sept. 30, and the banks have set their latest deadline for Oct. 31.
Wilmers said that acquiring Hudson City, which is based in Paramus, N.J., was similar to many of M&T’s previous deals, allowing M&T to acquire an extensive branch network in a growth market, contiguous to markets in which it already has an established presence.
“But in other ways, this merger has been unlike any other, perhaps in the history of American banking,” he said. “It has necessitated hard and tedious work of new and different varieties, and has required more time than any other in our history.” Among those tasks: employees verifying and validating the identities of more than 1 million customers in the past year as part of its “know your customer” program.
In 2013 and 2014, M&T spent more than $210 million and hired 581 new people for its anti-money laundering/Bank Secrecy Act systems. In addition, as of the end of last year, there were an additional 317 consultants and contract employees working with M&T.
Despite that heavy lifting and cost, Wilmers said, the planned merger with Hudson City “still presents a magnificent opportunity to expand into the New Jersey market, one with which we’re very familiar but where we have only a modest physical presence.” And despite the long wait, Wilmers said, the “economics of the transaction remain intact.”
During the shareholder question period, the only person to step to a microphone, Paul Durnan, of Burlington, Ont., said he was disappointed with the drawn-out Hudson City deal. The value of that deal was initially $3.7 billion, but as of last year, its value had soared to $5.4 billion, as M&T’s share price has climbed and it is paying for most of the deal with a set number of shares. Durnan asked Wilmers whether, in light of Hudson City’s results since the merger announcement, M&T ought to buy at a lower price.
Wilmers defended the merits of the deal. “When we put the numbers together, the numbers are just as attractive as the day we signed the contract,” he said. “And I think if we wanted to do something different, to renegotiate the contract, then we’d have to question whether we were doing it in good faith.”
Hudson City has assets of $38 billion, compared with $43.6 billion at the time the merger was announced in August 2012. Its 2014 net income was $158 million, down from $249 million in 2012, the year the deal was announced. Meanwhile, M&T’s assets have grown to $98.4 billion from $80.8 billion at the time of the 2012 announcement, and its 2014 net income was $1.07 billion, up from $1.03 billion in 2012.
M&T has nearly 15,800 employees across its territory, and paid them salary and benefits of more than $1 billion last year, Wilmers said.
Among the 302 people attending Tuesday’s meeting was Denis J. Salamone, Hudson City’s chairman and CEO. After the meeting, Salamone said Hudson City remained behind the deal with M&T.
“I think we supported and committed to the transaction through Oct. 31, so both sides are very committed to this transaction,” Salamone said.
In early April, M&T notified Hudson City that the Fed wouldn’t act on the merger application before the banks’ April 30 deadline to wrap up their deal. Hudson City on April 6 said that it needed time to evaluate that news; the latest extension, until Oct. 31, was announced 11 days later. Was Hudson City hesitating about following through on the deal?
“We didn’t have much hesitation at all,” Salamone said. “We just needed to do the due diligence to make sure this deal could close by Oct. 31 and conclude it affirmatively,” he said. “It’s a good deal for our shareholders. It was in 2012, and it still is now, and that’s why we’re going forward.”
Wilmers in his speech paid tribute to “two old friends”: Michael P. Pinto, M&T’s vice chairman and a Wilmers confidant, and Ronald E. Hermance Jr., a Batavia native and Hudson City CEO. Both of them died last year.
Pinto and Hermance negotiated the particulars of the Hudson City deal in fall 2012, “two Buffalo Bills fans chatting over what I presume were a couple of cold beverages,” Wilmers said. “I think of them often and regret that they haven’t been alongside us through this journey.”