The lawsuit, filed in Milwaukee County Circuit Court on Monday by an M&I shareholder from Bellerose Manor, N.Y., accuses M&I and its board of directors of breaching their fiduciary duty by entering into an agreement to sell Milwaukee-based M&I to Toronto's BMO Financial Group in a stock swap valued at $4.1 billion. BMO also is named as a defendant.
The lawsuit, which seeks class-action status, contends the price of $7.75 a share "substantially undervalues M&I and is merely an attempt by BMO to acquire M&I for a bargain price following the dramatic recession and unprecedented decline in real estate values of the past few years." The deal does not represent the true value of M&I shares, the lawsuit asserts.
The lawsuit notes that M&I stock traded for as much as $10.66 a share as recently as April 21, and that one analyst had set the price target for M&I stock at $9.50 a share.
The two banking firms announced last Friday that BMO Financial intends to buy M&I in a transaction scheduled to close on July 31, 2011.
M&I, which has posted eight consecutive quarterly losses as it has dealt with defaults on real estate loans, said the combination with BMO would make for a stronger bank with more products and services. The lawsuit suggests M&I was making progress toward a turnaround on its own.
M&I, with assets of almost $52 billion, is the largest bank based in Wisconsin.