TD Bank bulking up in Southeast with deal for First Horizon

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Toronto-Dominion Bank is buying First Horizon Corp. in an all-cash, $13.4 billion deal that would create a top-six bank in the U.S. by assets, the two companies announced on Monday.

The Canadian company has been looking for a major M&A deal in the U.S. for about a year and found one in the Memphis, Tennessee, regional power First Horizon, opening itself up a gateway to coveted markets in the Southeast. The agreement comes at a time, though, when U.S. regulators have tussled over taking a harder look at consolidation within the industry before approving major acquisitions.

TD and First Horizon expect the deal, which would create a $614 billion-asset company, to close this fall. But to account for the risk of delays in regulatory approvals as have occurred with some other recent deals, TD Bank would pay an extra 65 cents per share if the acquisition is not completed by Nov. 27. Beyond that, the deal could be terminated if it’s not closed within a year.

First Horizon’s President and CEO Bryan Jordan is expected to join TD as vice chair once the deal goes through and would report to Chief Executive Bharat Masrani.

"First Horizon is a great bank and a terrific strategic fit for TD,” Masrani said in a press release. “It provides TD with immediate presence and scale in highly attractive adjacent markets in the U.S. with significant opportunity for future growth across the Southeast.”

TD already has a presence in the South, with nearly 250 branches in Florida, North Carolina, South Carolina and Virginia. Combining with First Horizon would give it additional branches in those states as well as 154 in Tennessee and an entree into Georgia.

Jordan said in the release that TD Bank has committed to serving First Horizon’s local markets.

“This is a true growth story," he said.

The combined company would have more than 1,500 U.S. branches in 22 states once the deal is completed. TD is the second Canadian bank to announce a major M&A deal in recent months — Bank of Montreal in December agreed to buy Bank of the West in San Francisco.

And TD is paying a premium for the move. The price tag for First Horizon is equal to roughly 9.8 times the company’s estimated 2023 “fully-synergized earnings” and 2.1 times its estimated tangible book value.

TD is expected to add $55 billion in loans and $75 billion in deposits to its balance sheet once the deal goes through. The company does not expect to close any branches, is committed to keeping all client-facing bankers and will provide $40 million to First Horizon’s existing charitable program.

"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,” Leo Salom, head of TD’s U.S. retail operation, said in the release.

TD’s securities unit and JPMorgan Chase provided financial advice to the Canadian company for the deal. Simpson Thacher & Bartlett and a second firm, Torys, were its legal advisors. First Horizon received financial advice from Morgan Stanley and legal counsel from Sullivan & Cromwell.