Dive Brief:

• Buffalo, New York-based M&T Bank on Monday said it would buy Bridgeport, Connecticut-based People's United Financial in an all-stock deal worth $7.6 billion. The deal is expected to close in the fourth quarter of 2021, pending regulator and shareholder approval.
• The combined entity would have $205.4 billion in assets and cover 12 states from Maine to Virginia, plus the District of Columbia. The deal would provide an entryway for M&T into the Boston market. And People's United's Bridgeport office would serve as M&T's New England regional headquarters, M&T said.
• The combined bank would also carry a network of 1,100 branches — although People's United announced last month it is shrinking about one-third of its physical footprint. It said it wouldn't renew its contract to maintain 148 branches within Stop & Shop locations, mostly in Connecticut and New York, once it expires in 2022. People's United operates about 450 branches overall, The Wall Street Journal reported.

Dive Insight:

With the deal, M&T said it plans to cut about $330 million in annual expenses that would otherwise be duplicated. But that total includes the Stop & Shop branch-closure plan People's United already launched, American Banker reported. 

M&T CEO René Jones, one of four Black chief executives in the Fortune 500, will lead the combined bank in the same capacity, M&T said in a Monday press release.

"In People's United, we have found a partner with an equally long history of serving and supporting customers, businesses and communities," Jones said. "Combining our common legacies and our complementary footprints will strengthen our ability to serve our communities and customers, and provide solutions that make a difference in people's lives."

People's United shareholders will receive 0.118 of a share of M&T common stock for each People's United share they own. Shareholders in the Connecticut bank will own about 28% of the combined company when the deal is complete, according to the press release. People's United CEO Jack Barnes will join M&T's board of directors at that point, the release said.

"M&T is a like-minded partner that shares our culture of supporting communities by focusing on building meaningful relationships and providing personalized products, services and local market expertise to customers, while building on our legacy of excellence in service," Barnes said. "The merger extends our reach by providing customers access to a larger banking network and an expanded array of services. I am confident our shared community banking philosophies will provide significant long-term value for our shareholders, employees and loyal customers."

Many regional banks are turning to mergers and acquisition as a growth strategy because low interest rates have made lending stagnant. Commercial real-estate loans, including some in New York City's hard-hit hospitality sector, make up about 40% of M&T's portfolio, The Wall Street Journal reported.

Columbus, Ohio-based Huntington Bank and Detroit-based TCF agreed in December to merge to create a $168 billion-asset bank.

CIT Group and First Citizens BancShares in October announced plans to merge and form a $110 billion-asset bank. The Federal Deposit Insurance Corp. and the Fed extended the comment period on that merger through Monday.

And Pittsburgh-based PNC in November agreed to buy the U.S. arm of Spanish lender BBVA for $11.6 billion.

Further acquisitions of foreign banks' presence on U.S. soil could be on the horizon. HSBC is expected to announce Tuesday its withdrawal from consumer banking in the U.S., according to the Financial Times, capping months of speculation.

The tie-up between $142.2 billion-asset M&T and $63.2 billion-asset People's United would mark the Buffalo-based lender's first acquisition since it absorbed Hudson City Bancorp in 2015. M&T had historically been a serial acquirer, buying two dozen or so competitors over three decades, according to The Wall Street Journal. The Hudson City deal, however, took three years to complete because of enforcement actions on both sides.

M&T announced its intention to buy Hudson in August 2012 — and the $3.8 billion deal would have been the largest between U.S. banks that year. But the Federal Reserve slapped the bank with an enforcement action in 2013 over its anti-money laundering compliance efforts. The central bank didn't fine M&T but questioned its internal controls regarding foreign correspondent accounts it brought under its umbrella when it acquired Wilmington Trust in 2010. The Fed released M&T from that enforcement action in 2017.

The Consumer Financial Protection Bureau (CFPB) and Justice Department, meanwhile, ordered Hudson in 2015 to pay nearly $33 million over practices the regulator said denied fair access to mortgage loans to residents in majority-Black and Hispanic neighborhoods.

M&T has a market value of more than $19 billion, The Wall Street Journal reported. People's United is valued at roughly $6.6 billion.