Yahoo Finance First Horizon (FHN)-TD Deal Canceled Amid Banking Crisis
First Horizon Corporation FHN-Toronto-Dominion Bank TD merger deal seems to have fallen victim to the ongoing regional banking crisis in the United States. Yesterday, in a press release, both companies announced the mutual termination of the transaction as “TD does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon.”
Following this, FHN tumbled to a 52-week low of $8.99 per share before rebounding and closing 33.2% down.
Per the terms of the termination agreement, TD will pay $200 million to First Horizon in cash. This is in addition to the $25 million fee reimbursement due to First Horizon pursuant to the merger agreement.
The all-cash transaction, announced in February 2022, was valued at $13.4 billion and expected to close by Nov 1, 2022. But the deal closure witnessed a series of delays as TD was unable to get regulatory approvals for the same.
At the time of announcing the deal, it was agreed upon by both companies if the transaction does not close by Feb 27, 2023, it will be terminated. However, on Feb 9, FHN and TD mutually extended the outside date of their proposed merger to May 27. Since then, both banks have revealed that they do not think the deal will close by May either.
The regulators have been clamping down on large bank deals, with many such transactions taking a longer than usual time to close.
Further, the current turmoil in the U.S. regional banking industry seems to be another reason for calling off the deal, though First Horizon’s CEO Bryan Jordan noted that this wasn’t the case. TD faced pressure from some investors to scrap the deal after the start of the U.S. regional banking crisis.
For the last two months, the fastest rate hikes since the 1980s have led to a crisis in the banking industry and resulted in the collapse of four banks – Silvergate Capital, Signature Bank, Silicon Valley Bank and First Republic Bank.
First Republic Bank, the second biggest bank failure in history, was subsequently acquired by JPMorgan JPM earlier this week. The deal will complement JPM’s wealth business and result in increased penetration within the high-net-worth clients. The company expects the transaction to generate more than $500 million of “incremental net income” annually.
Jordan added, “Our strong capital position, disciplined credit quality, expense control measures, and well-diversified and stable funding mix have enabled our business to navigate challenging banking industry dynamics and remain focused on executing our client-centric growth plan.”
Over the past three months, shares of FHN have plummeted 59.3% compared with the industry’s decline of 28.9%.
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Currently, First Horizon carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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