Marshall & Ilsley Corp. will continue expanding outside its core Wisconsin market next year by building branches rather than pursuing bank deals, according to Dennis J. Kuester, its president and chief executive.
The $39 billion-asset Milwaukee company plans to open as many as 20 additional branches in 2005 in Arizona, Minneapolis, and St. Louis, Mr. Kuester said Tuesday.
Most of Marshall & Ilsley’s 251 branches are in Wisconsin, but more than a quarter of its banking profits come other states, Mr. Kuester said. Most of its out-of-state branches by far, 32, are in Arizona. It has only a handful in Minneapolis, St. Louis, Las Vegas, and Florida, he said.
Speaking at Merrill Lynch & Co.’s Banking & Financial Services Investor Conference in New York, Mr. Kuester did not rule out acquisitions but gave key criteria any deal would have to meet.
First, the target company would have to focus on owners of small and midsize businesses and be in a large metropolitan area. Second, the deal would have to be accretive almost immediately, and “the pricing is pretty tough today to make an acquisition and be accretive,” Mr. Kuester said.
In a telephone interview Thursday, chief financial officer John Presley said the company will consider opportunities as they arise but “we’re not making any specific statements” about what is being considered.
Marshall & Ilsley’s last bank acquisition was in October 2002, when it landed Mississippi Valley Bancshares Inc., the holding company for Southwest Bank of St. Louis, for $507 million.
The Minnesota company was reportedly in talks to buy the $250 million-asset Frontenac Bank of Earth City, Mo., but according to a Nov. 9 article in the St. Louis Business Journal, the negotiations stalled two weeks ago because the asking price was too high. The article said that Frontenac, which has three branches, wanted three times its book value, which was $24 million midyear.
Marshall & Ilsley declined to discuss the matter Thursday. Frontenac said that only its chief executive would do so, but that he was not available to speak.
It is a different story for dealmaking at Marshall & Ilsley’s technology unit, Metavante Corp., which has completed five acquisitions this year and is to close a sixth this quarter.
Mr. Kuester said he expects Metavante to contribute revenue of about $1.2 billion and net income of $90 million to $100 million next year. Metavante contributed $681 million in revenue to date and $56 million in profits last year. Once again, Mr. Kuester reiterated that the company has no plans to spin off the unit.
On Wednesday, Marshall & Ilsley filed a shelf registration with the Securities and Exchange Commission for 6 million shares of common stock, which analysts said could free up $250 million of capital that it could use for deals. Anthony R. Davis, an analyst with Ryan Beck & Co. in Richmond, Va., said that any bank M&I bought would probably be in one of its newer markets. However, it sees “more attractive returns in the technology business,” Mr. Davis said.
