M&T shares rise on Santander deal talks

SHARES IN M&T, the US bank in which AIB is selling a significant stake, rose the most in two months in New York trading after reports that the lender had restarted discussions about combining with Banco Santander.

M&T, whose second-largest shareholder is Warren Buffett’s Berkshire Hathaway, climbed 8 per cent, to $92.36 in New York Stock Exchange composite trading, the third-biggest gain in the Standard and Poor’s 500 Index, before giving up some gains to trade over 5 per cent higher at $90.095 in late afternoon.

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 had again started exploring a deal over the summer and had 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 had yet to resolve the question of who would control the combined business, they added.

It remains uncertain whether the pair will reach an agreement.

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

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

Santander would then have increased its stake in the new bank by buying the 22.5 per cent stake in M&T owned by AIB, which is selling 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. M&T, which has $68 billion in assets and 750 branches in New York, Pennsylvania and Maryland, wanted to maintain control of the combined entity. – Copyright The Financial Times Limited 2010