Toronto-Dominion (TD) to buy First Horizon (FHN). Bank stocks to bag?

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Toronto-Dominion (TD) to buy First Horizon (FHN). Bank stocks to bag?

Toronto-Dominion (TD) to buy First Horizon (FHN). Bank stocks to bag?
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Highlights

  • First Horizon Corporation (NYSE: FNH, FNH: US) and Toronto-Dominion Bank (TSX: TD) made headlines on Monday morning, February 28, after the two shared their plans of a merger.
  • While this acquisition plan is being dubbed as TD’s biggest deal ever its stocks dwindled by about two per cent in on Monday following this announcement (10.07AM EST).
  • First Horizon stocks, at this time, were surging by over 29 per cent.

First Horizon Corporation (NYSE: FNH, FNH: US) and Toronto-Dominion Bank (TSX: TD) made headlines on Monday morning, February 28, after the two shared their plans of a merger.

While this acquisition plan is being dubbed as TD’s biggest deal ever its stocks dwindled by about two per cent in on Monday following this announcement (10.07AM EST). First Horizon stocks, at this time, were surging by over 29 per cent.

Let us find out more about the deal.

Toronto-Dominion (TSX: TD) and First Horizon deal: Key insights

Toronto-Dominion Bank is all set to acquire First Horizon in an all-cash transaction worth US$ 13.4 billion, or US$ 25 for each FNH share, up from its closing price of US$ 18.25 on Friday, February 25.

Also read: Why is Baytex Energy (TSX: BTE) stock trending?

Toronto-Dominion believes that this tie-up can accelerate its “long-term” growth strategy in the United States, starting from the Southeast.

TD Bank added that its US franchise is set to be among the top six banks with assets worth US$ 614 billion and a network of 1,560 stores in the country on a pro forma basis with mergers adjustments excluded. 

It further added that TD Bank Group will have assets worth about C$ 1.84 billion with more than 2,600 branches catering to the financial needs of over 27.5 million customers across the globe.

TD is currently one of the top banks in Canada with a market capitalization of C$ 191 billion and a price-to-earnings (P/E) of 13.5. First Horizon, on the other hand, is the Memphis-based parent company of regional lender First Tennessee Bank, with approximately 200 branches across Tennessee.

Toronto-Dominion and First Horizon’s stock performances

Stocks of Toronto-Dominion Bank shot up by over two per cent to close at C$ 104.68 apiece on Friday, February 25, with 3.7 million shares exchanging hands.

First Horizon scrips also jumped by almost four per cent on Friday to close at US$ 18.25 per share.

Toronto-Dominion Bank and First Horizon’s financial performances

The Canadian bank posted net earnings of C$ 3.8 billion and diluted earnings per share (EPS) of C$ 2.04 in the last quarter of fiscal 2021.

Toronto-Dominion(TSX:TD) Q4FY2021 results

First Horizon, on the other hand, saw its net income decline to US$ 219 million in Q4 FY2021, down from that of US $224 million in Q3 FY2021.

Bottomline

TD stock, like other top banking stocks in the country, has been on investors’ radar lately due to the existing economic environments of high inflationary pressure and rate hike fears. This new development, which hints at the bank utilizing its significant capital stockpile, could provide an edge to TD’s banking business in North America.

Also read: Is CIBC (TSX: CM) a bank stock to buy as its profit soars 15% YoY?

TD believes that this acquisition will add First Horizon’s commercial and speciality banking capabilities to its banking business, positioning it as a “leading” national player in the commercial banking sector.

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