Acquisitive M&T Bank Corp. struck an agreement Monday to buy Hudson City Bancorp Inc. in a $3.7 billion deal that would create an eastern U.S. banking powerhouse with branches spread from Connecticut to Virginia.

Terms of the transaction value Paramus, N.J.-based Hudson City shares at about $7.22 apiece, a premium of 12% from its Friday close. Shareholders will receive 0.08403 of an M&T share or an equal value in cash, with up to a total balance of 60% stock and 40% cash.

Buffalo, N.Y.-based M&T, which survived the financial crisis better than many of its rivals and has been an opportunistic acquirer of late, said the deal would create an 870-branch network with little overlap. The target's Hudson City Savings Bank operates 135 branches with $25 billion in deposits and $28 billion in loans spread across New York, New Jersey and Connecticut.

M&T has about $80.8 billion in assets, compared to Hudson City's $43.6 billion in assets. M&T said post-deal it intends to repay $13 billion of Hudson City's long-term borrowings by liquidating its comparably sized investment portfolio.

M&T chairman and chief executive Robert G. Wilmers in a statement said that he sees an opportunity to expand Hudson City's offerings to its customers and generate new lines of income for the combined financial institution.

"As a thrift, Hudson City focused primarily on deposits and mortgages," Wilmers said. "M&T will build on Hudson City's loyal customer base to create a comprehensive community banking franchise that provides a full range of checking and savings accounts, debit and credit cards, home equity loans and other lending options, plus small business and commercial banking services and our premier wealth management and corporate trust solutions."

This is M&T's third large deal since 2009, following its $401 million purchase of Provident Bankshares Corp. and its $351 million purchase of Wilmington Trust Corp., and it tops its $3.1 billion acquisition of Allfirst Financial Inc. in 2002.

Hailing the deal, Hudson City chairman and CEO Ronald E. Hermance Jr. said "our stakeholders will participate in the growth of one of the nation's strongest and most successful banking franchises." Hermance is expected to be appointed to M&T's board after the deal closes.

JPMorgan Securities Inc.'s John Simmons, Michael Schechter and Scott Albinson acted as financial adviser to Hudson City and rendered a fairness opinion, with Sullivan & Cromwell LLP's H. Rodgin Cohen, C. Andrew Gerlach, Matt Friestedt, David Spitzer, Michael Lewis, Michael Baxter, Abi Yevnin and Henrik Patel serving as legal counsel. M&T took financial advice from Tim Main and Mark Burton at Evercore Partners Inc. and legal counsel from a Wachtell, Lipton, Rosen & Katz team led by corporate partners Edward D. Herlihy and Lawrence S. Makow that consists of corporate partners Richard K. Kim, David M. Adlerstein, counsel Justin S. Rosenberg and associates Octavian S. Timaru, partner Jeannemarie O'Brien and associate Adam J. Kaminsky on executive compensation and benefits, and partner Joshua M. Holmes on taxes.

Kirkland & Ellis LLP's Thomas Christopher and Richard Brand counseled Evercore. Simpson Thacher & Bartlett LLP advised JPMorgan.