May 15, 2023

TD cancels its $13.4 billion purchase of First Horizon, leaving a US bank in uncertainty.

The shares of the American regional bank, First Horizon dropped over 40% on Thursday after Toronto-Dominion Bank Group, a Canadian bank, canceled its $13.4 billion acquisition of First Horizon Corp.

In a joint statement, First Horizon and TD stated that they had opted to terminate the agreement since it was unclear when they would receive regulatory permissions. Along with a $25 million fee reimbursement, TD will provide First Horizon $200 million.

According to a First Horizon representative, the termination was exclusively due to TD’s inability to get clearances and had nothing to do with the continuing banking crisis.

In a letter to the U.S. bank, TD stated that they “could not provide an updated timeline for an extension and they could not produce assurance of regulatory approval in 2023 or 2024.” First Horizon CEO Brian Jordan told investors that TD made this statement.

In addition to the press statement, TD declined to comment.

According to Barclays analyst John Aiken, “we are surprised that the parties could not reach an agreed upon lower price and believe that there could be wider repercussions from walking away.”

With nearly $614 billion in assets and operations in 22 states, TD agreed to purchase First Horizon in February of last year in a deal that, according to estimates at the time, would have elevated the bank from eighth to sixth place in terms of size in the United States.

The Canadian bank is one of the most exposed to American markets due to its ownership of Charles Schwab, and as a result of its First Horizon U-turn, its U.S. strategy is in doubt.

“We believe TD shareholders will be concerned about the bank’s ability to deploy excess capital into the U.S. market given regulatory headwinds that could persist for the foreseeable future,” said KBW analyst Mike Rizvanovic.

In the first quarter, First Horizon’s average deposits decreased by 4% to $62.2 billion from the same period previous year.

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