Filing Pursuant To Rule 425
of the Securities Act Of 1933, as amended
and deemed Filed Pursuant To Rule 14(a)-12
of the Securities Exchange Act Of 1934, as amended
Filed By: Mercantile Bankshares Corporation
Subject Company: F&M Bancorp
Commission File No. 0-12638
March 13, 2003
This filing relates to a proposed merger between Mercantile Bankshares
Corporation and F&M Bancorp pursuant to the terms of an Agreement dated as of
March 13, 2003.
The following is a joint press release issued by Mercantile and F&M Bancorp on
March 13, 2003.
FOR IMMEDIATE RELEASE
MERCANTILE BANKSHARES CORPORATION AND F&M BANCORP ANNOUNCE
DEFINITIVE MERGER AGREEMENT
$500 million acquisition solidifies Mercantile's position as state's largest
independent banking company and elevates market share to #2 statewide
Enhanced platform creates potential for revenue growth and
significant cost savings
BALTIMORE and FREDERICK, MD, March 13, 2003 - Mercantile Bankshares Corporation
[Nasdaq: MRBK] and F&M Bancorp [Nasdaq: FMBN] today announced a definitive
merger agreement in which Mercantile will acquire F&M in a transaction currently
valued at $500 million in stock and cash. F&M Bancorp is a bank holding company
for Farmers and Mechanics Bank with 54 offices in Maryland. The transaction,
approved by directors of both companies, will enhance Mercantile's already
strong statewide presence, increase its existing market share and further
penetrate high-growth areas of the state. Already Maryland's largest independent
banking company, upon completion of the acquisition, Mercantile will also become
the state's second largest in terms of total deposits with $9.90 billion.
Under the terms of the agreement, shareholders of F&M will be entitled to
receive $46.00 in cash, 1.2831 shares of Mercantile, or a combination thereof,
subject to elections and allocation procedures. Based on Mercantile's recent
stock price, the application of these procedures would result in the exchange of
approximately 75 percent of the F&M shares for Mercantile common stock. It is
anticipated that the transaction will be completed by year-end 2003, pending
regulatory approvals and the approval of shareholders of F&M Bancorp. Two
F&M directors will be added to the Mercantile board.
"The acquisition of F&M solidifies our status as Maryland's leading banking
institution, enhances our competitive advantage and positions us for stronger
future growth," said Edward J. Kelly III, Chairman, President and CEO of
Mercantile. "Opportunities such as this one are rare and it should enable us to
create real value for our shareholders, customers and the communities in which
we operate. We expect this acquisition to be accretive to our earnings in the
first full year after closing."
"This transaction is an excellent one for F&M shareholders and customers," said
Faye E. Cannon, President and CEO of F&M. "In addition, Mercantile and F&M share
a long history and a desire to maintain our similar customer-oriented,
community-focused cultures. Both of our companies are relationship-driven and
highly complementary in commercial and retail banking, mortgage banking, and
investment and wealth management. This partnership makes good economic and
business sense."
An integration team has been formed with representatives from both companies and
will be led by Mr. Kelly and Ms. Cannon. As part of this process, F&M will
become a member of Mercantile's existing affiliate network with parts of the
business being combined with affiliates that are closest geographically to F&M's
customers. The bulk of F&M, however, will be combined with a Mercantile
affiliate to create a Frederick-based bank, with assets of approximately $1.6
billion. The company expects to eliminate 35 percent, or approximately $26.5
million, of operating expenses through branch consolidation and elimination of
administrative and operational redundancies. Mercantile intends to close a
number of branches,
but the closures will involve the consolidation of F&M and Mercantile branches
that will result in the best franchise overall. F&M customers will have access
to high quality, community-based banking, while enjoying the benefits that a
larger parent organization can provide.
Given its proven relationship-driven approach to community banking, an important
feature of the transaction is its impact throughout the Mercantile affiliate
network. By adding F&M to the Mercantile affiliate network, Mercantile benefits
not only in Frederick, but also in Howard, Carroll and Montgomery Counties. "I
am delighted that we will be able to strengthen our position in these high
growth areas of the state. Mercantile's affiliates in Frederick and Carroll
Counties will have the number one deposit market share in their communities.
Through the addition of F&M, Mercantile will also enter a new market in
Washington County," Kelly said.
The transaction, which is expected to close by year-end, is subject to, and
requires the approval of, F&M shareholders and banking and other regulators.
Sandler O'Neill & Partners, L.P. acted as financial adviser to Mercantile and
Venable, Baetjer & Howard LLP acted as its legal counsel. Keefe, Bruyette &
Woods, Inc. acted as financial adviser to F&M and Skadden, Arps, Slate, Meagher
& Flom LLP acted as its legal counsel.
Mercantile Bankshares Corporation, with assets in excess of $10.7 billion, is a
multibank holding company headquartered in Baltimore. It has 16 banking
affiliates in Maryland, one banking affiliate in Delaware and three in Virginia.
F&M Bancorp, with assets in excess of $2 billion, is a bank holding company
headquartered in Frederick, Md. Its two banking affiliates, Farmers and
Mechanics Bank and Home Federal, operate 48 banking offices in Frederick County
and six contiguous counties.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, statements about (i)
the benefits of a merger (the "Merger") between F&M Bancorp ("F&M") and
Mercantile Bankshares Corporation ("Mercantile"), including future financial and
operating results, cost savings enhancements to revenue and accretion to
reported earnings that may be realized from the Merger; (ii) Mercantile's and
F&M's plans, objectives, expectations and intentions and other statements
contained in this filing that are not historical facts; and (iii) other
statements identified by words such as "expects" "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," "targets," "projects," or words of
similar meaning generally intended to
identify forward-looking statements. These forward-looking statements are based
upon the current beliefs and expectations of the respective managements of
Mercantile and F&M and are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond our
control. In addition, these forward-looking statements are subject to
assumptions with respect to future business strategies and decisions that are
subject to change. Actual results may differ materially from the anticipated
results discussed in these forward-looking statements because of numerous
possible uncertainties.
The following factors, among others, could cause actual results to
differ materially from the anticipated results or other expectations expressed
in the forward-looking statements: (1) the businesses of Mercantile and F&M may
not be combined successfully, or such combination may take longer, be more
difficult, time-consuming or costly to accomplish than expected; (2) the
expected growth opportunities or cost savings from the Merger may not be fully
realized or may take longer to realize than expected; (3) deposit attrition,
operating costs, customer losses and business disruption following the Merger,
including adverse effects on relationships with employees, may be greater than
expected; (4) the regulatory approvals required for the Merger may not be
obtained on the proposed terms or on the anticipated schedule; (5) the
stockholders of F&M may fail to approve the Merger; (6) adverse governmental or
regulatory policies may be enacted; (7) the interest rate environment may
further compress margins and adversely affect net interest income; (8) results
may be adversely affected by continued diversification of assets and adverse
changes to credit quality; (9) competition from other financial services
companies in Mercantile's and F&M's markets could adversely affect operations;
(10) an economic slowdown could adversely affect credit quality and loan
originations; and (11) the involvement of the United States and its allies in a
possible war in southwest Asia could have unpredictable negative affects on our
businesses and the economy. Additional factors, that could cause actual results
to differ materially from those expressed in the forward-looking statements are
discussed in Mercantile's and F&M's reports (such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with
the Securities and Exchange Commission and available on the SEC's Internet site
(http://www.sec.gov).
Mercantile and F&M caution that the foregoing list of factors is not
exclusive. All subsequent written and oral forward-looking statements concerning
the proposed transaction or other matters attributable to Mercantile or F&M or
any person acting on their behalf are expressly qualified in their entirety by
the cautionary statements above. Mercantile and F&M do not undertake any
obligation to update any forward-looking statement to reflect circumstances or
events that occur after the date the forward-looking statements are made.
F&M and Faye E. Cannon, F&M's President and Chief Executive Officer,
and certain of F&M's other executive officers and directors may be deemed to be
participants in the solicitation of proxies from the stockholders of F&M in
favor of the Merger. The other executive officers and directors of F&M who may
be participants in the solicitation of proxies in connection with the Merger
have not been determined as of the date of this filing. A description of the
interests of Ms. Cannon and F&M's other executive officers and directors in F&M
is set forth in the proxy statement for F&M's 2002 Annual Meeting of
Stockholders, which was filed with the SEC on March 14, 2002. In addition to
those interests (i) Ms. Cannon and David R. Stauffer will receive, at the
closing time of the Merger, cash payments in respect of foregone option grants
of F&M
common stock, (ii) Mercantile will maintain a split-dollar life insurance policy
for James L. Hogan, (iii) certain executive officers, including Ms. Cannon, may
be entitled to receive lump sum payments of amounts due under certain individual
severance agreements or under the FMNB Executive Supplemental Income Plan, (iv)
two members of F&M's current board of directors, who have not been named as of
the date of this filing, will become directors of Mercantile following the
Merger, (v) four members of F&M's current board of directors, who have not been
named as of the date of this filing, will become directors of a wholly-owned
subsidiary bank of Mercantile following the Merger, (vi) a wholly-owned
subsidiary bank of Mercantile will form an advisory board which will include all
members of F&M's current board of directors, each member will serve for an
initial term of four years at a rate of $15,000 per year, (vii) each executive
officer will be entitled to receive reimbursement for tax advice and financial
planning, subject to a limit of $5,000 per executive and (viii) each of the
F&M's directors will receive a lump sum payment of $21,000 under the Unfunded
Deferred Compensation Plan for Non-Employee Directors when such director ceases
to be a member of F&M's board. If and to the extent that Ms. Cannon and Messrs.
Stauffer and Hogan will receive any additional benefits in connection with the
Merger that are unknown as of the date of this filing, the details of such
benefits will be described in the proxy statement/prospectus. Investors and
security holders may obtain more detailed information regarding the direct and
indirect interests of Ms. Cannon and Messrs. Stauffer and Hogan and F&M's other
executive officers and directors in the Merger by reading the proxy
statement/prospectus when it becomes available.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT.
F&M and Mercantile intend to file with the SEC a proxy
statement/prospectus and other relevant materials in connection with the Merger.
The proxy statement/prospectus will be mailed to the stockholders of F&M.
Investors and security holders of F&M and Parent are urged to read the proxy
statement/prospectus and the other relevant materials when they become available
because they will contain important information about F&M, Mercantile and the
Merger.
The proxy statement/prospectus and other relevant materials (when they
become available), and any other documents filed by F&M or Mercantile with the
SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In
addition, investors and security holders may obtain free copies of the documents
filed with the SEC by F&M by contacting Kaye Simmons, F&M Bancorp, 110 Thomas
Johnson Drive, Frederick, MD 21702, telephone 888-694-4170 or from F&M's website
at www.fmbn.com. Investors and security holders may obtain free copies of the
documents filed with the SEC by Mercantile by contacting David Borowy,
Mercantile Bankshares Corporation, Two Hopkins Plaza, Baltimore, MD 21201,
telephone: (410) 237-5900.
Investors and security holders are urged to read the proxy
statement/prospectus and the other relevant materials when they become available
before making any voting or investment decision with respect to the Merger.
Note: A conference call to discuss the transaction will be held on Thursday,
March 13, 2003 at 11 a.m. EST. The toll-free dial-in numbers are: 877-715-5317
(Domestic) and 973-582-2751
(International). The replay numbers are: 877-519-4471 (Domestic) and
973-341-3080 (International), access code 3808614. The replay will be available
from one hour after the call's conclusion through March 20, 2003.
A live audio webcast of the call as well as an investor presentation is
available online at www.mercantile.com.
For Mercantile Bankshares:
--------------------------
Investor Contact:
David Borowy
410-347-8361
david.borowy@mercantile.net
Media Contact:
Janice Davis
410-237-5971
janice.davis@mercantile.net
---------------------------
or
Steve Frankel/Carina Thate
The Abernathy MacGregor Group
212-371-5999
For F&M Bancorp:
----------------
Investor/Media Contact:
Kaye Simmons
301-694-4170
ksimm@fmbn.com