(Reuters) -Toronto-Dominion Bank Group will buy First Horizon Corp for $13.4 billion in cash to expand its footprint in the southeastern United States, the banks said on Monday, in a record acquisition for the Canadian lender.
The deal is the culmination of a concerted hunt for U.S. acquisitions by TD, the second-largest bank by market value in Canada, and follows unsuccessful bids for other U.S. assets that have come up for sale in recent months.
TD will pay $25 for each First Horizon share, a 37% premium to the target’s last close. Shares of Memphis-based First Horizon were up nearly 32% in premarket trading.
The deal will help TD’s U.S. franchise emerge among the top six U.S. banks, with about $614 billion in assets and a network of 1,560 branches, serving over 10.7 million U.S. customers across 22 states, the bank said. TD is currently the No. 8 bank in the United States by assets, with most of its operations located in the northeast and Florida. The deal will be funded entirely with TD’s excess capital.
“We are positive on the transaction as it not only deploys TD’s significant excess capital profitably but also infills its South-Eastern platform and extends around the Gulf Coast,” Barclays Analyst John Aiken said in a note.
“One concern, as we have with BMO’s recently announced acquisition, is the uncertain timeline for closing,” he added. “However, we do not view the sweetener as overly material, should approval expend past the end of November.”
The deal is TD’s biggest ever, Aiken said.
Canadian lenders have accelerated their efforts to expand in the United States, where the opportunity for growth remains greater due to the fragmented banking market, helped by billions of dollars in excess capital.
Bank of Montreal in December said it would pay $16.3 billion to buy BNP Paribas’ U.S. unit, Bank of the West.
There has also been a steady stream of tie-ups among midsized U.S. lenders in the last two years, as institutions seek increased scale to better compete against the country’s largest banks.
Should the deal not close before Nov. 27, First Horizon shareholders will receive another 65 cents per share on an annualized basis, until the closing date.
TD expects to incur total merger and integration costs of $1.3 billion primarily in the first two years following close. First Horizon’s CEO Bryan Jordan will become vice chair of TD Bank, the Canadian bank said.
(Reporting Nichola Saminather, Additional reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila and Andrea Ricci)
