In order to expand its footprint in the southeastern United States, Toronto-Dominion Bank Group will buy First Horizon Corp for $13.4 billion in cash, betting on rapid population growth in the region with its record acquisition.
TD, Canada's second-largest bank by market value, has long been searching for acquisitions in the U.S., and this deal follows on the heels of unsuccessful bids for other U.S. assets in recent months.
TD will fund the deal entirely with its excess capital. It will become the sixth-largest U.S. bank, up from No. 8, and will hold roughly $614 billion in assets while operating in 22 states. TD expects the populations in First Horizon's markets, which are expected to grow about 50% faster than the U.S. national average, to offer significant growth opportunities.
About 90% of domestic banking operations are controlled by Canada's top six lenders. They have been accelerating their expansion into the more fragmented U.S. market of late, helped along by billions of dollars in excess capital. In December, Bank of Montreal agreed to pay $16.3 billion for BNP Paribas' U.S. unit.
Meanwhile, over the past two years, midsized U.S. lenders have been seeking to build scale to better compete against the country's largest banks. In the biggest bank deal since the 2008 financial crisis, BB&T Corp bought SunTrust Banks in 2019, creating Truist Financial Corp. First Horizon itself bought Iberiabank in 2020.
TD expects merger and integration costs to total $1.3 billion, but it has no plans to close any branches or to scale down any of First Horizon's existing businesses. The acquisition will yield pretax cost savings of $610 million, as well as additional "meaningful" revenue synergies, executives at TD said.
The Biden administration, worried that declining competition is hurting Americans, is pushing regulators, including the Federal Reserve, to take a tougher line on mergers. However, there has been no indication yet whether regulators will seek to prevent this particular deal from going through.