Toronto-Dominion Bank has agreed to buy First Horizon Corp. for $13.4 billion, putting its massive capital stockpile to use for its largest deal ever and expanding its presence in the U.S. Southeast.
The Canadian bank will pay $25 a share in cash for Memphis, Tennessee-based First Horizon, according to a statement.
The deal would be Toronto-Dominion’s largest acquisition ever and Chief Executive Officer The deal would be Toronto-Dominion’s largest acquisition ever and Chief Executive Officer Bharat Masrani’s boldest move since taking the reins in 2014. The transaction also would continue the the Toronto-based bank’s pattern of growing in the U.S. through acquisitions, with its home country offering limited growth prospects.
The purchase “provides TD with immediate presence and scale in highly attractive adjacent markets in the U.S. with significant opportunity for future growth across the Southeast,” Masrani said in the statement, calling First Horizon “a terrific strategic fit” for his company.
First Horizon has 412 branches and more than 1.1 million individual and business customers across 12 states. It has leading positions in Tennessee and Louisiana; a presence in Florida, the Carolinas and Virginia; and “important footholds” in Atlanta, Dallas and Houston, Toronto-Dominion said.
That would move Toronto-Dominion beyond its current U.S. East Coast footprint and make its U.S. franchise into one of the nation’s top six banks, with about $614 billion in assets, the bank said. Bryan Jordan, First Horizon’s CEO, will join Toronto-Dominion as vice chair, reporting to Masrani.
The deal also helps Toronto-Dominion put to work a large stockpile of capital that it had built up after Canadian regulators prevented the nation’s banks from buying back stock or boosting dividends during the early portion of the pandemic. The lender has about C$21.6 billion in excess Common Equity Tier 1 capital. Toronto-Dominion announced separately on Monday that it’s terminating an automatic share purchase plan under its buyback plan.
With bank mergers in Canada’s highly concentrated banking sector blocked by regulators, Toronto-Dominion has long looked south for expansion. The firm entered U.S. consumer banking with the $3.8 billion purchase of 51% of Banknorth Group Inc. in 2004, which gave it almost 400 branches in six states in the U.S. Northeast.
Three years later, Toronto-Dominion doubled its U.S. presence with the $8.34 billion acquisition of Commerce Bancorp Inc., adding almost 460 locations. Masrani was head of Toronto-Dominion’s U.S. division at the time of the Commerce deal, which took advantage of a stronger Canadian dollar and upheaval at the target that included a U.S. investigation that led to the ouster of its founder.
Even before the planned First Horizon takeover, Toronto-Dominion already had more branches in the U.S. than in its home market.
The First Horizon deal is expected to close in the first quarter of Toronto-Dominion’s fiscal 2023, which starts in November. If the transaction isn’t completed before Nov. 27, First Horizon shareholders will receive an additional 65 cents a share on an annualized basis for the period from that date through the day immediately before closing. And If it’s not done by Feb. 27, 2023, the deal will terminate without an extension.