Marshall & Ilsley Corporation-parent company of M&I Bank-has agreed to be acquired by BMO Financial Group in a stock-for-stock deal that's valued at $4.1 billion.

Under the terms of the deal, each share of Milwaukee-based M&I-which has a major Minnesota presence-will be exchanged for 0.1257 shares of Toronto-based BMO. The transaction values each share of M&I at $7.75-notably higher than Thursday's $5.79 closing price.

The transaction is expected to close before July 31, 2011. As part of the agreement, BMO has agreed to buy M&I's $1.7 billion in Troubled Asset Relief Program preferred shares and vowed to repay them in full before the deal closes.

“This transaction is good news for M&I's shareholders, customers, employees, and the communities we serve,” M&I Chairman, President, and CEO Mark Furlong said in a statement. “It will position us with the capital strength and scale to enhance our commitment to customers and communities.”

Shareholders rallied behind the deal, bringing shares of M&I's stock up about 18 percent to $6.83 in mid-morning trading on Friday.

After the deal closes, Furlong will become CEO of the combined company's U.S. personal and commercial banking business, based in Chicago.

M&I is Wisconsin's largest bank and has $51.9 billion in assets. It has offices in Minnesota, Wisconsin, Arizona, Florida, Indiana, Missouri, and Nevada-including 26 in the Twin Cities metro area and one in Duluth.

Jeanne Crain, president of M&I Bank's Minnesota region, told Twin Cities Business on Friday that it's unclear at this point what impact, if any, the transaction will have on the bank's 480 Minnesota employees.

“No decisions have been made at this time,” she said, adding that she sees the deal as a very positive move for the bank and its shareholders. “There hasn't been any communication on that level yet.”

In 2009, M&I Bank reported a $758.6 million loss. In January of that same year, it announced the elimination of 830 positions, or 8 percent of its workforce, and froze pay for some executives. The cuts reportedly affected 23 Minnesota employees.

Then in October of this year, M&I Bank learned that it was a target in the long list of “clawback” lawsuits through which the bankruptcy trustee in the Tom Petters case is attempting to recoup funds involved in fraudulent transfers. M&I Bank was allegedly used by Petters and his associates to “funnel investor funds through the $3.65 billion Ponzi scheme,” and trustee Doug Kelley is seeking $3.7 million from M&I.