M&T says it has OKs for deal to buy Allfirst

Acquisition would create 18th-largest U.S. bank

March 12, 2003|By William Patalon III | William Patalon III,SUN STAFF

M&T Bank Corp. said yesterday that it has lined up all the regulatory approvals needed for it to consummate its purchase of Allfirst Financial Inc., the Baltimore-based subsidiary of Allied Irish Banks PLC that last year was hit by a $691.2 million currency-trading scandal.

"These are the approvals that allow us to move forward with the completion of the legal transaction [allowing the start of] the process of integrating the two organizations into one," said C. Michael Zabel, vice president of corporate communications for M&T.

M&T, based in Buffalo, N.Y., said it received Federal Reserve Board approval yesterday. It has oral approval from Maryland and expects written confirmation by the end of the week, Zabel said.

It also has in hand the needed approvals from Pennsylvania, Delaware and New York.

M&T expects the sale to be completed on or about April 1, Zabel said.

On that day, M&T expects to cut 346 employees, in the first of three previously announced sets of job cuts, according to the bank.

Another 144 workers would be let go around the Fourth of July weekend, when the Allfirst bank branches would become M&T locations.

The largest - and last - layoff is scheduled for a month after the branch conversions, when 642 Allfirst workers are to be fired.

The 1,132 job cuts equate to about 20 percent of Allfirst's 6,000-member work force, a ratio that's at the bottom of the 20 percent to 45 percent range of reductions that analysts said M&T usually resorts to when it buys a bank. But nearly 60 percent of the job cuts - 657 workers - would be made in Baltimore, most of them in back-office or support positions, the bank has said.

In September, Dublin, Ireland-based Allied Irish agreed to sell Allfirst in a $3.1 billion deal that would transform M&T into the 18th-largest U.S. banking company. It's now the 26th- largest U.S. bank.

As part of the cash-and-stock deal, Allied Irish gets a 22.5 percent stake in the newly merged venture. Shareholders of both banks approved the sale in December. The companies have been awaiting regulatory approval so they could finish the transaction.

The Allfirst currency-trading scandal erupted in February last year when the bank discovered that trader John M. Rusnak had run up nearly $700 million in losses over five years. Experts have described it as one of the largest cases of banking fraud in history.

The bank said Rusnak covered up his losses by doctoring company books, falsifying documents, creating phony trades and bullying subordinates who questioned his activities.

Those moves combined to make it look as if Allfirst was profiting from is currency-trading operation, even as losses mounted into the hundreds of millions of dollars.

In January, Rusnak, 38, was ordered to spend 7 1/2 years in prison, in a sentence the presiding judge described as one of the most severe ever for white-collar crime.

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