Harris expands in Midwest by buying two Wisconsin banks

Northwestern Financial Review, Aug 1-Aug 15, 2007 by Sandin, Erik

The Bank of Montreal continued moving into the Midwest with a deal to purchase two Milwaukee-based banks for more than $327 million and expand its Chicago-based Harris Bank retail unit into a third state.

Bank of Montreal announced on July 10 separate agreements to buy Ozaukee Bank in a stock transaction worth $190 million, and Merchants and Manufacturers Bancorp for about $137.2 million in cash.

The deals give Bank of Montreal Ozaukee Bank's $694 million in assets and six Milwaukee-area branches, and Merchants and Manufacturers' six bank subsidiaries operating 34 full-service and 11 limited-service branches in the Milwaukee area along with a combined $1.5 billion in assets and $1.2 billion in deposits.

Bank of Montreal is Canada's fourth-largest bank and its Harris Bank retail unit is the third-largest bank in Chicago based on deposits, with operations in Illinois and Indiana.

Harris Bank Chief Executive Officer Ellen Costello said in news releases that the purchases of Ozaukee Bank and Merchants and Manufacturers give Harris strong footholds in the Wisconsin market.

"When you consider that Ozaukee County has the second-highest median household income in the state, we believe the combined power of our two banks will deliver tremendous results for customers in this market," she said.

Ozaukee Bank founder and Chairman M.D. "Mal" Halpern said the sale joins two banks that have similar business philosophies.

"Ozaukee Bank is known for the solid, long lasting relationships we have with our customers and communities," he said. "We really like Harris' commitment to people, customers, communities and employees."

Costello said the number of Merchants and Manufacturers locations along with Merchants' business philosophy made the company a good fit for Harris.

"Merchants and Manufacturers' presence throughout much of Wisconsin gives us an attractive entry in this new market," she said. "In particular, Merchants and Manufacturers' emphasis on serving small and mid-market commercial customers complements our recent addition of our business banking services in the greater Milwaukee area."

Michael J. Murry, chairman and CEO of Merchants and Manufacturers, said the sale to Bank of Montreal was the result of Merchants' long-term plan that sought ways of strengthening the bank. Although he said Merchants looked at making acquisitions, the board decided to accept Bank of Montreal's offer on the recommendations of consulting companies in St. Louis and Chicago.

Murry said Merchants offices will take the Harris Bank name, adding that Merchants customers will see more products and services from Harris.

"First of all, there's added products and services, and added capacity with the capital markets group with Bank of Montreal," Murry said. "Already one customer has called us and asked to meet with Harris and the capital market group."

Terms of the deal with Ozaukee Bank call for bank shareholders to receive about 3 million shares of BMO Financial Group, the Toronto-based parent company of Harris and Bank of Montreal. The exact number of shares will be determined based on a formula prior to closing. In the Merchants and Manufacturers deal, Harris will pay about $37.30 (U.S.) for every outstanding share of Merchants common stock, or about $137.2 million.

Both acquisitions are expected to close later this year, pending approvals from Ozaukee Bank and Merchants and Manufacturers shareholders, and U.S. and Canadian regulators.

These latest deals by the Bank of Montreal continue the bank's strategy of looking for acquisitions in Midwestern cities, according to the Milwaukee Business Journal.

That publication noted that in 2005, a BMO Financial Group official said the company was seeking acquisitions in Milwaukee, Minneapolis, Kansas City and St. Louis.

Harris Bank has more than 230 locations in Illinois and Indiana, and the company said in a news release that this latest deal brings Harris closer to its goal of 350 to 400 locations in the Midwest. Harris currently has $42 billion in assets and $29 billion in deposits.

By Erik Sandin