On Thursday, Toronto-Dominion Bank Group (TD.TO) called off its $13.4 billion acquisition of First Horizon Corp (FHN.N), causing a 40% drop in the US regional bank’s shares in premarket trading.
In a joint statement, First Horizon and TD stated that they had mutually decided to terminate the transaction due to uncertainty about when regulatory approvals would be obtained. TD will pay First Horizon $200 million in addition to a $25 million fee reimbursement.
TD’s largest deal to date, which it announced more than a year ago, had faced months of regulatory uncertainty, and Canada’s No. 2 lender was under pressure from some investors to cancel the purchase following the regional banking crisis in the United States.
According to a First Horizon spokesperson, the termination was solely due to TD’s inability to obtain approvals and had nothing to do with the ongoing banking turmoil.
TD declined to comment further than the press release.
“We are surprised that the parties could not come to an agreed upon lower price and believe that there could be broader repercussions from walking away from the deal,” Barclays analyst John Aiken said.
“This could affect the willingness of potential partners to sit across the table from TD in the future,” Aiken added.
TD agreed to buy First Horizon in February last year to expand its presence in the United States. The Canadian lender also has a stake in Charles Schwab (SCHW.N) making it one of the most exposed to U.S. markets.
The collapse of the deal further spooked already shaky sentiment towards U.S. regional banks. Three have collapsed since February after a deposit flight spiraled out of control.
The latest was First Republic Bank, which was taken over by regulators who then sold its assets to JPMorgan Chase & Co (JPM.N) earlier this week.
Average deposits at First Horizon fell 4% to $62.2 billion in the first quarter, compared to the end of last year.
TD, which acquired New York-based boutique investment bank Cowen Inc for $1.3 billion this year, was also in the running for BNP Paribas’ (BNPP.PA) U.S. unit, Bank of the West, but later lost that bid to peer Bank of Montreal (BMO.TO).
ORTEX said on Thursday that TD was still the world’s most shorted banking stock, confirming its position early last month.