TD Bank, one of the largest banks in Canada and increasingly a major player in the United States, announced plans to acquire First Horizon Bank on February 28, 2022. First Horizon Bank is one of the oldest banks operating in the United States having been established in 1864. TD Bank notes in their presentation that the deal will result in their U.S. franchise ranking as the sixth largest bank in the country. So in many ways the rationale for this transaction is very similar to Bank of Montreal’s acquisition of Bank of the West which was announced last year; it is an opportunity for a non-U.S. bank to increase their scale within the country.
In this instance, TD Bank is acquiring a fairly large bank with meaningful scale. Some of the details on the asset TD Bank will be acquiring:
- Assets of $89 billion
- Net Loans of $55 billion
- Total Deposits of $75 billion
- Almost 8,000 employees
- Operations in 12 states
- 1.1 million customers
In addition, TD Bank plans to use the acquisition to fill in their presence in key markets such as Florida, North Carolina and South Carolina. The company is paying $13.4 billion all of which will be paid in cash, which equates to a price to tangible book value multiple of 2.1 times at close and pro forma price to 2023 earnings multiple of 9.8 times. Despite all of this, TD Bank still expects the deal to be 10% accretive to its earnings. The transaction represents a 33% premium to the closing price for First Horizon Bank on Friday. Of note, we had rated First Horizon Bank a 3.1 out of 5.0, which is an above average rating. We expect to see more deals like this in the future given the attractive outlook for banks and the continued significantly fragmented nature of the regional banks in the United States.
Other Noteworthy Banks in Tennessee to keep an eye on: