First Horizon Plunges 38% Below TD Bid In Regional Bank Nightmare

A First Horizon bank branch in Peachtree Corner, Georgia, U.S., on Thursday, March 3, 2022. Toronto-Dominion Bank agreed to buy First Horizon Corp. for $13.4 billion, putting its massive capital stockpile to use for its largest deal ever and expanding its presence in the U.S. Southeast.

(Bloomberg) -- The turmoil in regional banks sent First Horizon Corp. down as much as 33%, as analysts cast doubt on whether Toronto-Dominion Bank will follow through with its planned $13.4 billion takeover of the lender.

First Horizon shares were briefly halted due to volatility and were down 23% to $15.49 as of 11:53 p.m. New York time. The plunge put the shares 38% below TD's offer of $25 per share.

“With a walk date in May looming and bank stocks imploding, the question is will TD walk away or ask for a massive cut?” said Cabot Henderson, who focuses on merger arbitrage and special situations at JonesTrading.

“Things are so fluid and with downside seemingly getting scarier by the minute, it's extremely hard to have any conviction,” Henderson added.

As the fallout spreads from SVB Financial Group's failure, merger-arbitrage traders are rushing to examine which pending deals might be affected. The TD-First Horizon transaction had already been seen at risk because of regulatory delays, even before the collapse of SVB and Signature Bank poisoned investor sentiment for regional banks.

While TD has previously said it remained committed to the transaction, Wall Street analysts believe the door is open to renegotiating the terms.

“I think the likelihood that TD's going to close this deal at the previously announced price is very low,” Nigel D'Souza, a bank analyst at Toronto-based Veritas Investment Research Corp., said in an interview. Spokespeople for Toronto-Dominion and First Horizon did not immediately respond to requests for comment on Monday.

First Horizon shares have fallen about 37% this month. The bank is seeing pressure on its deposits “at a worse rate than the industry average,” with deposits falling 10% over the last two quarters, CIBC analyst Paul Holden said in a note to clients on Friday.

“The developments regarding Silicon Valley Bank and the banking sector in general have only exacerbated those fears,” said Frederic Boucher, a risk arbitrage analyst at Susquehanna International Group.

--With assistance from .

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