M&T Bank to Acquire People’s United Financial in $7.6 Billion Deal, Shares Gain

M&T Bank Corp said on Monday that it has agreed to acquire a savings and loan holding company People’s United Financial in an all-stock transaction deal worth nearly $7.6 billion.

Following this announcement, People’s United Financial‘s shares, which slumped 23% in 2020, jumped over 13% to $17.79 on Monday. Similarly, M&T Bank’s shares, which slumped 25% last year, rose 20% so far this year. The stock traded about 2% higher at $152.83.

According to the deal, People’s United shareholders will receive 0.118 of a share of M&T common stock for each People’s United share they own. Following the completion of the transaction, former People’s United shareholders will collectively own nearly 28% of the combined company.

“The implied price would be a small premium to PBCT‘s $6.6 billion market cap., which, along with MTB‘s higher P/TBV multiple, would help the deal math. PBCT is a $62 billion asset bank with a New England and NYC tri-state area footprint. The deal would add scale to MTB‘s $145 billion asset base, bringing efficiency ratio and ROTCE benefits from cost saves and expansion into New England,” noted Ken Usdin, equity analyst at Jefferies.

The combined company will create a diversified, community-focused banking franchise with approximately $200 billion in assets and a network of more than 1,100 branches and over 2,000 ATMs that spans 12 states from Maine to Virginia and the District of Columbia, the company said in the press release.

M&T Bank Stock Price Forecast

Nine analysts who offered stock ratings for M&T Bank in the last three months forecast the average price in 12 months of $150.00 with a high forecast of $163.00 and a low forecast of $131.00.

The average price target represents a -1.64% decrease from the last price of $152.50. From those nine analysts, four rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $160 with a high of $213 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the bank’s stock.

Several other analysts have also updated their stock outlook. M&T Bank had its price objective boosted by equities research analysts at Deutsche Bank to $161 from $155. The firm currently has a “buy” rating on the financial services provider’s stock.

Moreover, the Royal Bank of Canada boosted their target price to $150 from $130 and gave the stock an “outperform” rating. Barclays boosted their target price to $163 from $159 and gave the stock an “overweight” rating.

Analyst Comments

“We view M&T Bank as one of the more conservative and higher-quality banks we cover, with better-than-peer credit losses through the cycle. In times of credit volatility, MTB tends to be favored among investors as more of a safe-haven play,” said Ken Zerbe, equity analyst at Morgan Stanley.

“It is considerably more profitable than peers, but the negative is its lack of loan growth as it continues to see run-off of its acquired Hudson City residential loan portfolio. We believe MTB deserves to trade at a modest premium to its peers.”

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