TD Bank, First Horizon Agree To Terminate $13 Billion Merger

A Toronto-Dominion (TD) bank branch in Toronto, Ontario, Canada, on Wednesday, March 15, 2023. First Horizon Corp. fell by the most since September 2008 as the crisis in regional banks cast doubt on whether Toronto-Dominion Bank will follow through with its planned $13.4 billion takeover of the lender.

(Bloomberg) -- Toronto-Dominion Bank and First Horizon Corp. have agreed to terminate their previously announced merger amid uncertainty about the possibility of regulatory approvals.

The lenders said in a statement Thursday that they “entered into a mutual agreement” to terminate their 2022 merger. TD will make a $200 million cash payment to Memphis-based First Horizon, on top of a $25 million reimbursement due as part of the merger agreement.

The move is a reversal of TD's push into the US, at a time when the nation's regional banks are being roiled by deposit outflows and investor caution after a series of smaller firms collapsed. Banking indexes have fallen more than a third since the deal was first agreed.

Shares in First Horizon almost halved on the news in early trading.

Canada's second-biggest bank informed First Horizon that it was unable to secure a “timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon,” the statement said. “Because there is uncertainty as to when and if these regulatory approvals can be obtained,” the two sides ended the agreement.

‘Unexpected' Announcement

“While today's announcement is unfortunate and unexpected, First Horizon will continue on its growth path,” said First Horizon Chief Executive Officer Bryan Jordan in the statement. TD's CEO Bharat Masrani said the decision provides “colleagues and shareholders with clarity.”

TD agreed to buy First Horizon for $13.4 billion in early 2022. It would have been its largest deal ever and seen it expand its presence in the US Southeast. The combination would give it more than 400 new branches in the country and add more than 1.1 million individual and business customers across 12 states.

The deal valued First Horizon at just over double its tangible book value. The KBW Regional Banking Index traded at a weighted average of 2.05 times tangible book at the time the deal was announced, but now has fallen to a 1.4 times, according to data compiled by Bloomberg.

Even before the market turmoil, doubts about the deal had been swirling for months amid concerns that US regulators may block the deal. President Joe Biden has been urging tougher oversight of mergers and Senator Elizabeth Warren criticized the Toronto-based bank over its sales practices.

The deal has already been hit by delays with the Canadian lender saying in March that it didn't expect to receive the necessary regulatory approvals by May 27 — as it had projected in early February — and it couldn't provide a new projected closing date.

--With assistance from Georgi Azar.

(Updates with details throughout.)

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