The drama is over.
The long-running — and oft-delayed merger of TD Bank Group and First Horizon — was called off early Thursday, with both companies citing insurmountable regulatory hurdles.
The deal,
In a joint statement Thursday, the companies said they mutually agreed on the decision after TD Bank Group, based in Toronto, Canada, determined it could not see a clear path to completing the deal this year.
"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," Bharat Masrani, TD Bank Group's CEO, said in a press release.
Under the terms of the termination agreement, TD Bank Group said it will make a $200 million cash payment to First Horizon.
The $81 billion-asset First Horizon said the failure to finalize the sale did not relate to any issues with its performance or financial health.
Bryan Jordan, chairman, president and CEO of First Horizon, said in an interview that the banks could not delve into the details, but regulatory delays left both companies convinced the process had drawn out too long and, given a dubious outlook, it was time to cut the cord.
Jordan said nixing the deal was "disappointing" but "any issues were completely unrelated to First Horizon."
He said the Memphis, Tennessee-based bank had continued to build its loan pipeline and deposit relationships for the past 15 months as if it were preparing for a future as a stand-alone bank. He said that, even though First Horizon had still hoped to close the deal as recently as early this month, it had determined from the start it was prudent to operate in a way that positioned the bank for either a sale or a canceled merger.
Jordan declined to address whether the recent collapses of Silicon Valley Bank, Signature Bank and First Republic Bank had any impact on regulators' mindset or First Horizon's view of its ability to close the sale to TD Bank.
Jordan said that, despite some pressure on deposit levels across the industry following the spate of recent failures, First Horizon's deposit base was stable. He said the bank's Southeast markets continue to show economic strength and, as a result, he expects First Horizon to grow loans this year, albeit at a slower pace than in 2022.
In April, First Horizon reported first-quarter net income of $256 million, or 43 cents per share, up from $198 million, or 34 cents per share, a year earlier. The banks said its deposits decreased 3% from the prior quarter to $61.4 billion, while its loans rose 2% to $59 billion.
"Fundamentally, we are in a strong place," Jordan said.
"I'm not sitting in a very dark room here today about the economy," he said. "Our loan growth potential continues to be good…I think the economy today is still fundamentally good. All in all, still forward momentum."
Most recently, First Horizon and TD Bank Group had set a goal of culminating the deal by May 27. After delaying it from late last year to early 2023, the companies missed a Feb. 27 target date and pushed it out three months to the late May deadline. Both sides had cautioned in recent weeks that they remained uncertain about their ability to finalize the transaction.
Several large bank deals have faced drawn-out regulatory reviews over the past two years, including
"Any time you have this kind of uncertainty, deal discussions tend to slow," Jacob Thompson, managing director of investment banking at Samco Capital Markets, said in a recent interview.
There were just 168 U.S. bank M&A deals announced last year, down from 204 in 2021, according to S&P Global Market Intelligence. Only 19 deals were announced in the first quarter of this year, according to S&P's latest data. That marked the lowest quarterly total since the second quarter of 2020, when only nine deals were announced amid the immediate fallout from the coronavirus pandemic that year.
First Horizon's stock was trading at about $10.22 per share Thursday afternoon, down more than 30% from Wednesday's closing.
