Toronto-Dominion Bank said Monday it would pay a 37% premium for First Horizon Corp. in a $13.4 billion deal that gives the Canadian bank an entry into the Southeastern market and elevates its scale to the sixth largest U.S. bank.
In one of the larger North American bank mergers in recent months, the bank, which also goes by TD Bank
agreed to buy First Horizon Corp.
for $25 a share in cash, well above its closing price on Friday of $18.25 a share.
First Horizon stock rallied 45.8% in morning trades. TD’s stock slipped 1.5%.
Jefferies bank analyst Ken Usdin said the merger was unexpected.
“The $13 billion deal is surprising given the slow pace of large-scale deal approval in the new regulatory regime and that FHN was not seen as a near-term seller,” Usdin said.
Analysts said the transaction puts the spotlight on other Southeast banks as potential acquisition targets. Some of those names include Cadence Bank
Hancock Whitney Corp.
and Pinnacle Financial Partners
which has a large presence in Tennessee.
TD said it expected the acquisition of the Memphis, Tenn. -based bank to immediately add to adjusted earnings per share after it closes as expected in its first quarter of fiscal 2023. The bank is targeting about $610 million in cost synergies.
TD Chief Executive Bharat Masrani said First Horizon will provide TD with immediate presence and scale in “highly attractive” adjacent markets in the U.S. and “significant opportunity” for growth.
TD executive Leo Salom will lead the combined company. His title is currently group head, U.S. Retail, TD Bank Group, and president and CEO, TD Bank.
“The Southeastern U.S. represents a tremendous opportunity for TD and the addition of First Horizon’s commercial and specialty banking capabilities will position us as a leading national player in commercial banking,” Salom said.
Including the First Horizon business, TD’s U.S. franchise will have about $614 billion in assets and a network of 1,560 stores, with nearly 11 million U.S. customers across 22 states.
With assets of $89 billion as of Dec. 31, First Horizon operates 412 branches, with more than 1.1 million consumer, business and commercial customers in 12 states.
Populations in First Horizon’s markets are seen growing about 50% faster than the U.S. national average.
The deal comes as analysts have become modestly more bullish on First Horizon’s earnings outlook. The bank is currently expected to earn 32 cents a share in its first quarter, up from a projection of 31 cents a share in late January, according to FactSet estimates.
First Horizon stock has gained 10.5% over the past three months through Friday, while TD’s stock has climbed 11.5% and the S&P 500 has lost 4.6%.
First Horizon shares have rallied 10.5% over the past three months and TD’s stock has gained 11.5%, while the S&P 500 index
has slipped 4.6%.
Tomi Kilgore contributed to this report.