Canada’s TD Bank scraps deal for US lender First Horizon

Canada’s TD Bank is scrapping its planned $13.4bn acquisition of US lender First Horizon, the companies said on Thursday.

The deal, which was first announced in February 2022, had been in regulatory limbo for months, with the closing repeatedly delayed. US politicians had raised concerns about TD, which is Canada’s second-largest bank, becoming too big an American player and about its treatment of US customers

First Horizon’s shares plunged 41 per cent in premarket trading, reflecting fears that it would be engulfed by the broader regional banking crisis sparked by the March collapse of Silicon Valley Bank. Its shares were already down nearly 40 per cent this year.

In a joint statement, the banks said: “Because there is uncertainty as to when and if these regulatory approvals can be obtained, the parties mutually agreed to terminate the merger agreement.” 

The deal would have turned Toronto-headquartered TD into the sixth-largest lender in the US. Following the decision to ditch the agreement, TD will make a $200mn cash payment to Memphis-based First Horizon.

First Horizon chief executive officer Bryan Jordan said that terminating the deal was “unfortunate and unexpected” but the bank would “continue on its growth path operating from a position of strength and stability”.

TD had offered $25 a share, a 37 per cent premium, for First Horizon in February 2022, but some investors had recently called on the Canadian bank to scrap the merger.

“This decision provides our colleagues and shareholders with clarity. Though disappointed with the outcome, we move forward with a strong, growing franchise in the United States, servicing more than 10mn customers across our footprint,” said Bharat Masrani, TD’s chief executive.

The large Canadian banks have been on an acquisition spree in the US in recent years. Bank of Montreal closed on its acquisition of Bank of the West earlier this year.

US regulators’ refusal to wave through the TD deal raises questions about what role they will allow overseas banks to play in helping to consolidate the fragmented regional banking sector.

That question has become an urgent one now that midsized and regional banks have suffered steep share price falls and deposit outflows since the collapse of SVB.

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