M&T Bank Corp., the lender that postponed its purchase of Hudson City Bancorp amid a Federal Reserve probe into money laundering, reached a deal with the regulator to improve compliance.
Hudson City advanced 2.4 percent to $8.57 at 4:30 p.m. in New York, the biggest jump since January. M&T’s agreement with the Fed added to investor confidence about the eventual completion of the deal, said Gerard Cassidy, an analyst at RBC Capital Markets.
“It’s definitive now,” he said. “Everyone knows what they have to do, when they have to do it by.” Buffalo, New York-based M&T climbed 1.1 percent.
M&T announced an agreement in August, valued at $3.7 billion at the time, to buy Hudson City as part of an effort to expand in New Jersey. The buyer said in April that the regulatory review delayed the completion of the deal for Hudson City, whose chief executive officer, Ron Hermance, 65, returned to the bank in August after taking medical leave to receive a bone-marrow transplant.
“Hudson City is a company that needs to find a buyer and needs to sell itself,” said Bob Ramsey, an analyst at FBR Capital Markets. “M&T is the best option that they have.”
M&T agreed to hire an independent consultant to review transactions that involved “high-risk customer accounts” in the second half of last year. The lender also will submit to the Fed a revised anti-money-laundering compliance program that describes actions that will be taken, including timelines for completion, within 60 days of the agreement, according to a document released today by the regulator.
“This is the next step in the process we started talking about in April, and we need to complete this process before we can move on to the Hudson City deal again,” said Michael Zabel, a spokesman for M&T.
Cassidy said the delay may discourage other banks from pursuing acquisitions.
“The message coming from the regulatory community, as evidenced by this transaction, is that you need to have all your ducks lined up to do a deal,” Cassidy said. “And even when you think you have them lined up, you still may go through extra regulatory scrutiny to get a deal done.”
Led by CEO Robert Wilmers, M&T counts Warren Buffett’s Berkshire Hathaway Inc. among the bank’s largest shareholders. Wilmers, 79, added about $40 billion to both its loan and deposit books since 2008 through at least four acquisitions, according to data compiled by Bloomberg.
The bank dropped 4.5 percent on April 12 after announcing the review. Paramus, New Jersey-based Hudson City declined 5.5 percent that day.
FBR’s Ramsey said the written agreement, which doesn’t call for a fine, shows “the problems are going to be a little bit more difficult to resolve than we previously would’ve thought.” Still, the agreement doesn’t change his expectation that the deal will be completed, he said.
JPMorgan Chase & Co. is Hudson City’s banker on the deal, while Sullivan & Cromwell LLP provided legal advice. M&T is using Evercore Partners Inc. and Wachtell, Lipton, Rosen & Katz.