BMO Financial Group has signed an agreement to acquire all outstanding shares of common stock of US based diversified financial services firm Marshall & Ilsley (M&I), in a stock-for-stock transaction.

Under the terms of the agreement, each outstanding share of M&I will be exchanged for 0.1257 shares of Bank of Montreal upon closing.

Based on the closing share price of Bank of Montreal on the TSX of C$62.05 on 16 December 2010, the transaction values each share of M&I at $7.75, or an aggregate amount of approximately $4.1bn in Bank of Montreal common shares.

As part of the agreement, BMO will purchase M&I’s TARP preferred shares at par plus accrued interest – with full repayment to the US Treasury immediately prior to closing. M&I’s existing warrants held by the US Treasury will also be purchased by BMO.

The transaction, which has been approved by the BMO and M&I Boards of Directors, is expected to close prior to 31 July 2011.

Upon closing, Mark Furlong, who is currently chairman, president and CEO of M&I, will become CEO of the combined US Personal and Commercial banking business, based in Chicago. He will report to Bill Downe, president and CEO of BMO Financial Group.

Downe said for customers, shareholders and employees, the combined bank group will be a stronger entity. This acquisition gives BMO the opportunity to leverage the greatest strength of both organizations: our brands and reputations.