Just a day after its name was first floated as a possible white knight for Dime Bancorp, M&T Bank Corp. dropped out of the undeclared bidding war, opting instead to buy Pennsylvania-based Keystone Financial for $1 billion.

M&T of Buffalo said on Wednesday that it would acquire Keystone Financial Inc. of Harrisburg, Pa., in a stock-and-cash deal valued at more than $1 billion.

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