TD scraps First Horizon deal worth billions

After weeks of speculation about the fate of a takeover deal that would make TD Bank the sixth-largest lender in America, the offer is officially off the table. 

What happened: Without a clear path to regulatory approval, Canada’s second-largest bank is scrapping its plans for a US$13.4 billion acquisition of US lender First Horizon. Given that three regional banks have failed this year, maybe, just maybe, TD actually dodged a bullet. 

Catch up: Senator Elizabeth Warren passionately opposed the deal, citing concerns raised in a 2022 media report that alleged TD was involved in shady consumer practices, including setting high sales targets that resulted in customers being pressured to open accounts.   

Why it matters: Holding onto high-quality assets in the face of a possible recession might not be bad for TD. Investors also weren’t sold on the deal in the first place, comparing it to BMO’s takeover of Bank of the West and claiming that TD was paying far more for less.

So it should come as no surprise that TD’s share price has been left relatively unscathed. But for First Horizon? It turns out the only thing worse than being a US bank right now is one with a failed takeover on its record. Shares were down over 32% yesterday on the news.  

  • On the other hand, TD will miss out on the opportunity to build its presence in the US Southeast and sell its products to new customers across 400 branches.
  • But being left with a large amount of capital on the table (minus the $225 million it’ll have to pay to terminate the deal) means TD can now seek other deals.  

Zoom out: Canadian banks have a bit of an obsession with expanding into the US as of late. They are more profitable than ever (outpacing America’s largest institutions on some measures) and are ready to put that money to work... that is, if regulators will let them.—SB