Shareholders of Provident Bankshares Corp. will meet April 8 to vote on the merger with M&T; Bank Corp., a stock-swap deal whose value has been dropping along with M&T;'s stock price.
The merger needs the approval of two-thirds of eligible votes cast.
The marriage of Maryland's largest independent bank with Buffalo, N.Y.-based M&T;, the region's second-largest bank in terms of deposits, was announced in December. Around that time, the deal was valued at $407.1 million, according to a proxy statement issued last week.
Under the terms, Provident shareholders would receive about 0.17 of a share of M&T; for each Provident share. In December, M&T;'s stock traded at $61.18, putting the value of Provident's stock at $10.50 a share.
Since then, M&T;'s stock has fallen along with the overall market. Proxy materials note that as of Feb. 12, M&T;'s stock had dropped to $38.57 a share, making a share of Provident worth $6.62.
Yesterday, M&T;'s stock rose 18 cents to close at $38.43. Provident's shares ended at $6.28, up 7 cents.
Banking consultant Bert Ely says Provident's stock appears to be trading in line with M&T;'s, a sign that the market expects the deal to go through.
Provident stockholders might be unhappy, but M&T;'s stock has performed better in recent months than shares of Baltimore market rivals Bank of America, SunTrust and PNC, Ely says. And Provident's stock, Ely adds, "quite possibly would be lower today had it not done the deal."
Provident has long prided itself on its independence. But despite raising capital last spring and later getting a $151.5 million infusion from the federal Troubled Asset Relief Program, the bank began exploring various options, including a merger, in November. A rating agency had downgraded certain securities, including some held by Provident, the proxy said, and the bank was looking at the prospect of further downgrades.
Potential partners were contacted, and by early December Provident had three prospects. Two were invited to submit more detailed proposals, but only M&T; did.
If Provident backed out of the deal to merge with another bank, it would have to pay a $15.8 million termination fee to M&T.;
Provident's board recommends that shareholders vote for the merger, citing among other things the difficult economic environment for financial institutions.
Mutual fund companies T. Rowe Price Associates and the Vanguard Group, both major investors in Provident, declined to comment on the deal.