CHICAGO — The Bank of Montreal announced Friday its acquisition of the Milwaukee-based Marshall & Ilsley Corp. in a $4.1 billion stock deal.

The 163-year-old M&I is Wisconsin’s top bank, with a commercial banking presence that reaches into Arizona, Florida, Indiana, Kansas, Minnesota, Missouri, and Nevada and a smaller broker-dealer operation. The acquisition extends the reach of the Bank of Montreal, whose parent is BMO Financial Group, in the U.S. market, where its commercial banking operations are conducted under its Harris Bank unit.

“The acquisition … transforms BMO’s competitive position in the U.S. Midwest by bringing together highly complementary businesses that align well with BMO’s retail, commercial, and asset/wealth management businesses in the U.S.,” BMO chief executive officer Bill Downe said in a statement.

The deal, which would create the 15th largest bank in the country, has been approved by both banks’ boards and is scheduled to close by mid 2011.

BMO has been steadily adding to its municipal banking, sales, and trading staffs over the last two years in its Chicago, New York City, and California offices as it seeks to join the ranks of top senior managers of negotiated issues.

M&I’s smaller municipal operation is based in Milwaukee, where it operates a trading desk. BMO officials could not say by deadline how the deal would affect M&I’s municipal staff.

BMO ranks 17th so far this year as a senior manager on negotiated work in the Midwest while M&I ranks 41st. On competitive deals in the Midwest, BMO ranks seventh and M&I ranks eighth. BMO ranks 24th so far this year nationally among senior managers while M&I ranks 43rd , according to Thomson Reuters.

M&I’s chief executive officer, Mark Furlong, would become CEO of the banks’ U.S. personal and commercial banking business based in Chicago, and Harris CEO Ellen Costello will serve as CEO of Harris Financial Corp. and the U.S. chief for BMO Financial Group.

As part of the transaction, BMO will purchase and repay M&I’s $1.7 billion of preferred shares in the Troubled Asset Relief Program. The Milwaukee bank has struggled to return to profitability.

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