First Horizon and TD Bank Call Off $13 Billion Merger Amidst Banking Crisis
Written by A.M. Ray aka Jamm on May 4, 2023
First Horizon and TD Bank have mutually agreed to abandon a $13 billion deal, adding to the turmoil affecting regional banks in the United States. The merger would have created America’s sixth-largest bank, but First Horizon’s share price has fallen 40% in recent months due to the worst banking crisis since 2008. The stock fell further after the deal was called off. The collapse of Silicon Valley Bank and Signature Bank in March, and the failure of First Republic on Monday, has eroded investor and customer confidence in regional banks. PacWest Bank confirmed on Thursday that it is seeking a financial lifeline.
The regulatory approval process for the merger took longer than expected, leading to questions about whether the deal would be approved at all. TD said the regulatory issue was unrelated to First Horizon’s falling market value. TD will pay First Horizon a $200 million breakup fee and $25 million in reimbursement fees.
Despite the merger’s cancellation, First Horizon remains stable, cash-rich, and diversified. The bank’s CEO, Bryan Jordan, said in a statement that the bank will continue to grow from a position of strength and stability. TD’s CEO, Bharat Masrani, said in a statement that the decision provided “clarity” to customers and shareholders.
The collapse of regional banks’ loans and bond holdings due to the Fed’s interest rate hikes to combat inflation has left some banks struggling to pay for withdrawals, while customers have been moving their money to larger banks. Other regional bank stocks have also fallen in recent days, as investors await the next development.
