M&T Bank Corp. said it is acquiring Keystone Financial Inc. for approximately $1 billion.

The deal, announced this morning, would create a company with 450 branches and 1,000 ATMs in four states. Buffalo, N.Y.-based M&T has $22.8 billion of assets. Keystone, of Harrisburg, Pa., has $7 billion of assets.

Under terms of the merger agreement, Keystone shareholders can receive either 0.05 shares of M&T common stock or $21.50 in cash in exchange for each outstanding share of Keystone common stock. The arrangement requires 65% of Keystone's 48,930,000 shares outstanding to be exchanged for M&T stock. The $1 billion price tag assumes 31,804,500 shares of Keystone common stock being exchanged for 1,590,225 shares of M&T common stock.

Upon completion of the merger, M&T plans to make a 10-for-1 split on its common stock, with the 0.05 exchange ratio being adjusted to reflect the split. M&T also intends to double the cash dividend on its common stock in connection with the closing of the merger to the equivalent of $2.50 per quarter on each pre-split share.

Officials at the two companies expect the deal to result in virtually no branch closings or layoffs of front-line personnel.

The deal is expected to close in the fourth quarter and has been approved by both banks' boards of directors. It awaits regulatory and shareholder approvals.

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