Magazine article American Banker

Insurer to Buy 10% of Wisconsin's Marshall & Ilsley

Magazine article American Banker

Insurer to Buy 10% of Wisconsin's Marshall & Ilsley

Article excerpt

CHICAGO -- Northwestern Mutual Life Insurance Co. of Milwaukee is staking out a large investment in Wisconsin's second largest banking company.

Northwestern, the nation's 10th largest insurance company with assets of $16 billion, this week said it plans to invest $50 million in the Marshall & Ilsley Corp., a $3.4 billion-asset bank holding company based in Milwaukee.

The investment will be in the form of a subordinated convertible note that would represent about 10.5% of the outstanding common shares of Marshall & Ilslwy. Northwestern would be the largest shareholder in Marshall & Ilsley if the note, paying 8% interest and maturing in 12 years, were to be converted into common stock.

Northwestern also will seek regulatory approval to increase its investment to 24.9% of Marshall & Ilsley, the maximum now permitted.

Federal Reserve Board approval is needed for Northwestern to complete its initial $50 million investment in Marshall & Ilsley. Anaylsts said Fed approval is likely, although not certain.

Gordon Gunnlaugsson, a Marshall & Ilsley vice president, said the banking company will count the investment as capital, thus strengthening its position for making acquisitions when interstate banking is approved.

"Capital is the world's most precious commodity in the banking industry," said A. Rodgin Cohen,a banking consultant. "In interstate [banking] plans, a bank's success will depend on its capital."

At the end of March, Marshall & Ilsley already had a strong primary capital base of 8.2%. Equity was $260 million.

Marshall & Ilsley "gets inexpensive money to fuel up acquisition activities" as a result of Northwestern's investment, said John cornwell, an analyst with Blunt Ellis and Loewi.

Under terms of the investment, Northwestern, if it converts the note to common stock, would pay $78. …

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