Canada's TD Bank called off its US$13.4bn acquisition of First Horizon on Thursday, citing lack of insight on the “timetable for regulatory approvals”. TD's retreat sent US regional bank First Horizon's shares tumbling by more than one-third.
The timing could not be worse for Tennessee-based First Horizon, coming on the heels of First Republic’s collapse after failing to find a white knight acquirer. And PacWest Bancorp on Wednesday said it is also considering "strategic alternatives", intensifying competition for strong buyers among troubled regionals.
TD agreed to buy First Horizon in February 2022 for US$25 a share, but the deal was derailed early this year by regulators. Weeks later, a banking crisis touched off by failures at Signature Bank and Silicon Valley Bank, roiled US regional banks including First Horizon. The last time the bank’s shares traded near US$25 a share was on February 28, 2023.
After SVB was seized by regulators on March 12, First Horizon shares fell to US$13.40. By mid-April the shares rose above US$18 with the TD deal still in play and the crisis subsiding, following stronger than expected first quarter results for most regionals. But speculators doubted TD would follow through with the agreement in the middle of a banking rout or would see to slash the price, and IFR reported last month that TD could pull the plug on the deal.
By midday on Thursday First Horizon shares were down 37% at US$9.49, after slumping as low as US$8.99, their lowest level since September 2020.
"While today's announcement is unfortunate and unexpected, First Horizon will continue on its growth path operating from a position of strength and stability," said First Horizon chairman, president and CEO Bryan Jordan in a statement.
Under the terms of the termination agreement, TD will pay First Horizon US$200m in cash in addition to the US$25m in fee reimbursement.
TD was being advised by its own bankers and JP Morgan. First Horizon was being advised by Morgan Stanley.