- Filing of certain prospectuses and communications in connection with business combination transactions (425)
December 17 2010 - 5:31PM
Edgar (US Regulatory)
Filed by Bank of Montreal
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934
Subject Company: Marshall & Ilsley Corporation
Commission File No.: 1-33488
This filing, which includes this BMO Investor Presentation, may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and comparable safe
harbour provisions of applicable Canadian legislation, including, but not limited to, statements
relating to anticipated financial and operating results, the companies plans, objectives,
expectations and intentions, cost savings and other statements, including words such as
anticipate, believe, plan, estimate, expect, intend, will, should, may, and other
similar expressions. Such statements are based upon the current beliefs and expectations of our
management and involve a number of significant risks and uncertainties. Actual results may differ
materially from the results anticipated in these forward-looking statements. Such factors include,
but are not limited to: the possibility that the proposed transaction does not close when expected
or at all because required regulatory, shareholder or other approvals and other conditions to
closing are not received or satisfied on a timely basis or at all; the terms of the proposed
transaction may need to be modified to satisfy such approvals or conditions; the anticipated
benefits from the proposed transaction such as it being accretive to earnings, expanding our North
American presence and synergies are not realized in the time frame anticipated or at all as a
result of changes in general economic and market conditions, interest and exchange rates, monetary
policy, laws and regulations (including changes to capital requirements) and their enforcement, and
the degree of competition in the geographic and business areas in which M&I operates; the ability
to promptly and effectively integrate the businesses of M&I and BMO; reputational risks and the
reaction of M&Is customers to the transaction; diversion of management time on merger-related
issues; increased exposure to exchange rate fluctuations; and those other factors set out on pages
29, 30, 61 and 62 of BMOs 2010 Annual Report. A significant amount of M&Is business involves
making loans or otherwise committing resources to specific companies, industries or geographic
areas. Unforeseen events affecting such borrowers, industries or geographic areas could have a
material adverse effect on the performance of our integrated U.S. operations.
Additional factors that could cause BMO Financial Groups and Marshall & Ilsley Corporations
results to differ materially from those described in the forward-looking statements can be found in
the 2010 Annual Report on Form 40-F for BMO Financial Group and the 2009 Annual Report on Form 10-K
of Marshall & Ilsley Corporation filed with the Securities and Exchange Commission and available at
the Securities and Exchange Commissions Internet site (http://www.sec.gov).
In connection with the proposed merger transaction, BMO will file with the Securities and Exchange
Commission a Registration Statement on Form F-4 that will include a Proxy Statement of M&I, and a
Prospectus of Bank of Montreal, as well as other relevant documents concerning the proposed
transaction.
Shareholders are urged to read the Registration Statement and the Proxy
Statement/Prospectus regarding the merger when it becomes available and any other relevant
documents filed with the SEC, as well as any amendments or supplements to
those documents, because they will contain important information.
A free copy of the Proxy
Statement/Prospectus, as well as other filings containing information about BMO and M&I, may be
obtained at the SECs Internet site (http://www.sec.gov). You will also be able to obtain these
documents, free of charge, from BMO at www.BMO.com under the tab About BMO Investor Relations
and then under the heading Frequently Accessed Documents, from BMO Investor Relations, Senior
Vice-President at 416-867-6656, from M&I by accessing M&Is website at www.MICorp.com under the tab
Investor Relations and then under the heading SEC Filings, or from M&I at (414) 765-7814.
BMO and M&I and certain of their directors and executive officers may be deemed to be participants
in the solicitation of proxies from the shareholders of M&I in connection with the proposed merger.
Information about the directors and executive officers of BMO is set forth in the proxy statement
for BMOs 2010 annual meeting of shareholders, as filed with the SEC on Form 6-K on February 26,
2010. Information about the directors and executive officers of M&I is set forth in the proxy
statement for M&Is 2010 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on
March 12, 2010. Additional information regarding the interests of those participants and other
persons who may be deemed participants in the transaction may be obtained by reading the Proxy
Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this
document may be obtained as described in the preceding paragraph.
Investor Presentation
Transforming BMO's U.S. Platform
Acquisition of Marshall & Ilsley Corp
December 17 ? 2010
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Forward Looking Statements & Non-GAAP Measures
Cautionary Statement Regarding Forward-Looking Information
Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities
regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbour" provisions of, and are intended to be forward-looking statements
under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, statements with respect to the
acquisition of M&I, plans for the acquired business and the financial impact of the acquisition and are typically identified by words such as "believe", "expect", "anticipate", "intend", "estimate", "plan", "will", "should", "may",
"could" and other similar expressions.
By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Such statements are based upon the current beliefs and expectations of our management
and involve a number of significant risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors
could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.
Such factors include, but are not limited to: the possibility that the proposed transaction does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing
are not received or satisfied on a timely basis or at all; the terms of the proposed transaction may need to be modified to satisfy such approvals or conditions; the anticipated benefits from the proposed transaction such
as it being accretive to earnings, expanding our North American presence and synergies are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions, interest
and exchange rates, monetary policy, laws and regulations (including changes to capital requirements) and their enforcement, and the degree of competition in the geographic and business areas in which M&I operates;
the ability to promptly and effectively integrate the businesses of M&I and BMO; reputational risks and the reaction of M&I's customers to the transaction; diversion of management time on merger-related issues;
increased exposure to exchange rate fluctuations; and those other factors set out on pages 29, 30, 61 and 62 of BMO's 2010 Annual Report. A significant amount of M&I's business involves making loans or otherwise
committing resources to specific companies, industries or geographic areas. Unforeseen events affecting such borrowers, industries or geographic areas could have a material adverse effect on the performance of our
integrated U.S. operations.
In calculating certain pro-forma impacts of the transaction and the $800 million in additional common equity on our Tier 1 capital ratio and common equity ratio we have assumed our interpretation of the proposed rules
announced by the Basel Committee on Banking Supervision (BCBS) prior to December 16 and our models used to assess those requirements are consistent with the final requirements that will be promulgated by BCBS
and the Office of the Superintendent of Financial Institutions Canada (OSFI). We have also assumed that the proposed changes affecting capital deductions, risk-weighted assets, the regulatory capital treatment for non-
common share capital instruments (i.e. grandfathered capital instruments) and the minimum regulatory capital ratios are adopted as proposed by BCBS and OSFI. We also assumed that existing capital instruments that
are non-Basel III compliant but are Basel II compliant can be fully included in such estimate. Our estimates of expected RWA and capital deductions for M&I at closing are based on anticipated balances outstanding and
credit quality at closing and our estimate of their fair value. It also reflected our assessment of goodwill, intangibles and deferred tax asset balances that would arise at closing. The full impact of the Basel III proposals has
been quantified based on our financial and risk positions at October 31, 2010 or as close to October 31, 2010 as was practical. The Basel rules are not yet finalized and are subject to change, which may impact the
results of our analysis.
Assumptions about current and expected capital requirements, M&I's revenues and expenses, potential for earnings growth as well as costs associated with the transaction, and expected synergies were material factors
we considered in estimating the internal rate of return to BMO and our estimate of the acquired business being accretive to BMO's earnings in 2013.
Assumptions about our integration plan, the efficiency and duration of integration and the alignment of organizational responsibilities were material factors we considered in estimating transaction and integration costs.
BMO does not undertake to update any forward-looking statement, whether written or oral, that may be made, from time to time, by the organization or on its behalf, except as required by law.
Non-GAAP Measures
Bank of Montreal uses both GAAP and non-GAAP measures to assess performance. Readers are cautioned that earnings and other measures adjusted to a basis other than GAAP do not have standardized meanings
under GAAP and are unlikely to be comparable to similar measures used by other companies. Reconciliations of GAAP to non-GAAP measures as well as the rationale for their use can be found in Bank of Montreal's
Fourth Quarter 2010 Earnings Release and Bank of Montreal's 2010 Management's Discussion and Analysis, all of which are available on our website at www.bmo.com/investorrelations.
Examples of non-GAAP amounts or measures include: cash earnings per share and cash productivity; revenue and other measures presented on a taxable equivalent basis (teb); amounts presented net of applicable
taxes, earnings which exclude the impact of provision for credit losses and taxes, and core earnings which exclude non recurring items such as acquisition integration costs.
Bank of Montreal provides supplemental information on combined business segments to facilitate comparisons to peers.
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Additional Information for Stockholders
In connection with the proposed merger transaction, BMO will file with the Securities and Exchange Commission a Registration Statement on Form F-4 that will include a Proxy Statement of M&I, and a Prospectus of
Bank of Montreal, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger when it
becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Proxy
Statement/Prospectus, as well as other filings containing information about BMO and M&I, may be obtained at the SEC's Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge,
from BMO at www.bmo.com under the tab "About BMO - Investor Relations" and then under the heading "Frequently Accessed Documents" or from M&I by accessing M&I's website at www.MICorp.com under the tab
"Investor Relations" and then under the heading "SEC Filings."
BMO and M&I and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of M&I in connection with the proposed merger. Information about
the directors and executive officers of BMO is set forth in the proxy statement for BMO's 2010 annual meeting of shareholders, as filed with the SEC on Form 6-K on February 26, 2010. Information about the directors
and executive officers of M&I is set forth in the proxy statement for M&I's 2010 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 12, 2010. Additional information regarding the interests
of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free
copies of this document may be obtained as described in the preceding paragraph.
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Transforming BMO's U.S. Operations
Delivers compelling transaction economics
BMO's strong capital position will be maintained
Capitalizes on opportune economic, regulatory and market environment
Extensive due diligence on loan portfolio and prudent loan valuation
Strategicall
y
Compelling
Financially
Attractive
Excellent
Cultural Fit
u
u
u
Consistent with BMO's strategy of expanding our U.S. business
Transforms and strengthens BMO's U.S. operations by increasing scale and
combining the best from both organizations
Positions the business for growth through exposure to M&I's multiple markets
Combines two organizations with strong customer focus
Consistent values, vision and culture
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Transaction Summary
Purchase Price US$7.75 per M&I common share or US$4.1 billion
Transaction Structure 100% stock consideration at a fixed exchange ratio of
0.1257 BMO common shares per M&I common share
Pro-forma Ownership1 Current BMO shareholders ~89%; M&I shareholders ~11%
TARP Repayment Repayment of US$1.7 billion of preferred shares, accrued and unpaid dividends, as well as outstanding warrants
Common Equity Issuance Intend to issue $800 million of BMO common shares prior to closing
Estimated Pre-tax Cost Synergies ~$250 million
Transaction Economics Estimated IRR >15%; accretive to cash EPS2 in Year 2 (2013); attractive valuation multiples
Regulatory Capital Impact Basel II Tier 1 Ratio3: ~170 bps
Basel III Common Equity Ratio3,4: ~110 bps
Expected Closing Date Fiscal Q3 2011
Required Approvals Regulatory and M&I shareholders (50.1% threshold)
C$ unless otherwise indicated
1. Pro-forma ownership percentages calculated prior to any subsequent common equity issuance.
2. Non-GAAP measure, see slide 1 of the presentation and page 91 of BMO's 2010 Annual Report
3. Pro-forma Q4 2010 capital ratios include intended common equity raise of $800 million.
4. Basel III figures as at October 31, 2010 are estimated based on Basel III 2019 rules announced prior to December 16th and the impact of certain key changes associated with the adoption of IFRS. Refer to Bank of
Montreal Management's Discussion and Analysis for fiscal 2010 for further details.
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Chicagoland
216*
Greater
Vancouver
74*
Greater
Toronto
202*
Greater
Montreal
94*
Greater
Edmonton
37*
Greater
Calgary
42*
Greater
Winnipeg
27*
Halifax /
Saint John
22*
BMO's Pro-forma North American Footprint
BMO Branches - 910 locations
Harris Private Banking (Wealth Mgmt)
Harris Bank Branches - 312 locations
BMO Capital Markets
* Combined retail locations in major urban centers
M&I (Marshall & Ilsley) Branches - 374 locations
Greater
Milwaukee
96*
Greater
Minneapolis
37*
Greater
Phoenix
48*
Greater
Indianapolis
42*
Florida
39*
Source: SNL Financial and Company Disclosure
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374 branches
$52 billion in assets
$40 billion in loans
$38 billion in deposits
#1 bank by deposit market share in Wisconsin
AUM of $33 billion and AUA of $129.3 billion
Trust offices in 13 states
Diversified Lines of Business
Business Highlights1
Overview of M&I
Top M&I Markets by Deposits
US$ unless otherwise indicated
LTM Revenue
US$2.5 billion
Source: SNL Financial and Company Disclosure
1 As at September 30, 2010
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C$ billions
Expanding Presence and Scale in the U.S.
Source: SNL Financial and Company Disclosure.
Note: Metrics as at October 31, 2010 for BMO and September 30, 2010 for M&I. Figures do not reflect any transaction adjustments or expected synergies.
M&I and BMO U.S. metrics converted into Canadian dollar equivalent.
1. Balance sheet items based on average balances.
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Capital Overview
BMO remains well-capitalized and is well-
positioned to meet applicable Basel III capital
requirements when implemented
BMO intends to raise approximately $800
million in additional common equity before the
transaction is completed, which has been
reflected in the pro-forma ratios
the benefit of anticipated retained earnings
growth prior to closing has not been
reflected
On a Basel II basis, the pro-forma Q4 2010
Tier 1 Ratio is ~11.7%
On a Basel III basis, the pro-forma Q4 2010
Common Equity Ratio is ~6.7%
Pro-forma Capital Ratios
Common Equity
Ratio (%)
Tier 1
Ratio (%)
Includes M&I's estimated risk weighted assets at closing.
Basel III figures as at October 31, 2010 are estimated based on Basel III 2019 rules announced prior to December 16th and the impact of certain key changes associated with the adoption
of IFRS. Refer to Bank of Montreal Management's Discussion and Analysis for fiscal 2010 for further details.
BASEL II1
Q4'10 Reported 13.4% 10.3%
Transaction Impact ~170 bps ~110 bps
Q4'10 Pro-forma 11.7% 9.2%
BASEL III1,2
Q4'10 Estimate 10.4% 7.8%
Transaction impact ~150 bps ~110 bps
Q4'10 Pro-forma 8.9% 6.7%
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Consumer (US$11.1 billion)
CRE (US$12.4 billion)
Loan Portfolio Characteristics
Total Loans Outstanding
US$39.7 billion
As at September 30, 2010
C&I (US$16.2 billion)
Owner Occupied
Commercial Mortgage
26%
Investor Owned
Commercial Mortgage
71%
1
Diversified loan portfolio mix by both asset class and
geography
primarily Midwestern footprint
Retail portfolio consists primarily of residential secured loans
Predominately prime
Home Equity primarily in WI (36%) with approximately
37% of the portfolio located in non-footprint states due to
a wholesale origination channel.
C&I portfolio consists of a diversified base of small business,
middle market, large corporate and public sector customers
across various industries and regions.
CRE portfolio comprised primarily of Investor Owned
Commercial Mortgages
Continued credit stabilization and improving asset quality of
loan portfolio over recent quarters
M&I has actively managed its loan portfolio to mitigate
credit risks
Non-performing loans as a percentage of total loans
have fallen since 2009 to ~4.0%
Stressed C&D portfolio now represents only 9% of total
loans vs. 23% in Q3 2007
Note: Loan portfolio detail based upon stratifications provided during the Q3 2010 call report.
1. Other C&I includes Portfolio Segments that are each <5% of the total.
Commercial Real
Estate
31%
Consumer
28%
C&I
41%
Wholesale
10%
Retail
6%
Fin. Inst.
7%
Manufacturing
18%
Other
33%
Other
19%
1st Mortgage
42%
Home Equity
39%
Developer
29%
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Review of M&I's loan portfolios utilized:
extensive bank resources for internal loan file reviews
and data analysis
augmented by third party portfolio analyses and
discussions with management
Individual credit files reviewed by approximately 50 BMO and
Harris senior risk professionals to assess risk profile and
credit mark
On-site team conducted extensive review of commercial
portfolio (over 2,500 loan files) providing coverage across all
major asset types, geography and segments
Detailed analysis of consumer portfolios completed
Also engaged two outside specialist firms to provide
independent credit mark assessment
Additional "deep dive" due diligence conducted into
specialized portfolio segments exhibiting higher risks
Extensive Loan Portfolio Due Diligence Conducted
Overview of Credit Mark
Extensive Due Diligence Process
Note: Portfolio breakdown illustrated here is based on stratification from credit due diligence and may not tie directly to the Q3 2010 call report data on page 9.
1. Total excludes $0.9 billion indirect auto loan sale executed in Q4 2010.
2. Through the cycle losses based on average loan portfolio balance since December 31, 2007 of US$45 billion.
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Clear Path Forward
Mark Furlong: CEO of combined U.S. P&C business
Ellen Costello: CEO of Harris Financial Corp. (U.S. Holding Company) and U.S.
Country Head for BMO Financial Group
Combine top management talent from both companies
Leveraging significant prior integration experience of both companies
Strong execution team focused on project management and driving results
Experienced dedicated teams to manage run-off loan portfolios and loss mitigation
Plan to convert systems to one combined technology and operations platform
Will ensure business-as-usual for customers
Capturing ~$250 million in identified cost savings with transaction and restructuring
charges of ~$540 million
Strong US
Managemen
t Team
Focused on
Integration
Execution
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Investor Relations
Contact Information
VIKI LAZARIS
Senior Vice President
416.867.6656
viki.lazaris@bmo.com
E-mail: investor.relations@bmo.com
www.bmo.com/investorrelations
Fax: 416.867.3367
TERRY GLOFCHESKIE
Director
416.867.5452
terry.glofcheskie@bmo.com
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