Canadian lender TD calls off $13.4b deal to buy First Horizon Bank

Canadian lender Toronto-Dominion Bank Group has called off its deal to acquire First Horizon Corp for $13.4 billion on Thursday, sending the U.S. bank’s shares down 44.5% in premarket trading.

TD and First Horizon mutually decided to end the deal because there was no clarity on when they would get regulatory approvals, the two banks said in a statement.

As part of the termination, TD will pay $200 million to First Horizon in addition to a $25 million fee reimbursement, the banks said.

The deal, which would have been TD’s biggest, had faced months of regulatory uncertainty and recently came under pressure from TD’s investors after the U.S. regional banking crisis.

The U.S. regional banking industry has been on shaky ground in the last two months, which saw three banks collapse after a flight of deposits spiraled out of control.

The latest to fall was First Republic Bank, which was taken over by regulators who then sold its assets to JPMorgan Chase & Co earlier this week.

Average deposits at First Horizon decreased 4% to $62.2 billion in the first quarter, compared to the end of last year.

The termination was solely related to TD, which was unable to get approvals, and it had nothing to do with the ongoing banking crisis or with First Horizon, a spokesperson for the U.S. bank said.

TD did not immediately respond to a request for comment.

“We are surprised that the parties could not come to an agreed upon lower price and believe that there could be broader repercussions from walking away from the deal,” Barclays analyst John Aiken said.

“This could affect the willingness of potential partners to sit across the table from TD in the future,” Aiken added.

TD first agreed to buy First Horizon in February last year to expand its presence in the United States.

Since then, the lender has acquired New York-based boutique investment bank Cowen Inc for $1.3 billion this year.

It was also in the fray for BNP Paribas’ U.S. unit, Bank of the West, but later lost that bid to peer Bank of Montreal.

ORTEX data from early last month showed the second-largest Canadian lender was the world’s most shorted banking stock.

Reuters

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