Action First Horizon (FHN): Why it jumped today

  • First Horizon Corp (NYSE:FHN) stock rose more than 30% in intraday trading today. That is why.

First Horizon Corp (NYSE:FHN) stock rose more than 30% in intraday trading today. Investors respond to the Toronto-Dominion Bank Group by announcing that it is buying First Horizon for $13.4 billion in cash (or US$25.00 for each common share of First Horizon).

With this transaction, TD is accelerating its strategy for long-term growth in the United States by acquiring a leading regional bank with a harmonized culture and risk management framework.

Following the closing of the transaction, Bryan Jordan, President and Chief Executive Officer of First Horizon, will join TD as Vice President, TD Bank Group, reporting to Bharat Masrani, and will join the TD’s senior management team. And he will also be appointed to the boards of TD’s US banking entities as director and chairman. Jordan will continue to be based in Memphis.

Leo Salom, Group Head, US Retail, TD Bank Group, and President and CEO, TD Bank, America’s Most Convenient Bank, will lead the combined business.

On a pro forma basis, excluding merger-related adjustments, TD’s US franchise will be one of the top six US banks, with approximately US$614 billion in assets and a network of 1,560 stores, serving more than 10.7 million US customers in 22 states; Globally, TD Bank Group will have approximately C$1.841 billion in assets, with more than 2,600 branches serving more than 27.5 million customers2.

First Horizon is headquartered in Memphis, Tennessee with assets of US$89 billion as of December 31, 2021. And First Horizon operates 412 branches and serves more than 1.1 million consumer, business and commercial customers worldwide. 12 states. TD will benefit from First Horizon’s strong regional presence, including leadership positions in Tennessee and Louisiana, additional density in Florida, the Carolinas and Virginia, and significant landmarks in attractive Atlanta markets , Georgia, and Dallas and Houston, Texas.

Collectively, First Horizon’s market populations are expected to grow approximately 50% faster than the US national average, with some markets far exceeding this level, providing significant opportunities for future growth as TD invests in the region. .

Transaction Highlights

The transaction is expected to be immediately accretive to TD’s Adjusted EPS at close and more than 10% accretive to 2023E Adjusted EPS on a fully synergized basis. The deal is expected to result in a fully synergized return on invested capital of 10% in 2023. This purchase price represents a multiple of 9.8 times First Horizon’s fully synergized earnings in 2023E and a multiple of 2.1 times the estimated tangible book value of First Horizon at closing. .

Going forward, TD expects to realize approximately US$610 million in pre-tax cost synergies, or 33% of First Horizon’s 2023E non-interest expense, through a combination of technology consolidation and systems, and other operational efficiencies. TD expects to incur total merger and integration costs of US$1.3 billion, primarily in the first two years after closing.

The transaction is expected to close in the first quarter of TD’s fiscal year 2023 and is subject to customary closing conditions, including First Horizon shareholder and U.S. and Canadian regulatory approvals. If the transaction does not close by November 27, 2022, First Horizon shareholders will receive, at closing, an additional $0.65 per share on an annualized basis for the period from November 27, 2022 through the day immediately preceding fence. The agreement will terminate, unless otherwise extended, if not completed by February 27, 2023.

TD expects to use excess capital from its balance sheet for the transaction, reflecting its strong capital and liquidity position. Concurrent with this announcement, TD separately announced that the automatic stock purchase plan established for its normal course issuer bid will automatically terminate in accordance with its terms.

At closing, TD’s Tier 1 common equity ratio is expected to be above 11%.

KEY QUOTES:

“First Horizon is a great bank and a great strategic fit for TD. It provides TD with immediate presence and scale in very attractive adjacent US markets, as well as significant future growth opportunities in the Southeast. Working with the First Horizon team, TD will build on the success of its strong franchise and deliver the legendary customer experiences that set us apart in all markets across our footprint.

“I am very pleased to have Bryan and talented leaders from across First Horizon join TD. Their deep customer and community relationships and proven success as an engine of growth will be invaluable as we integrate our teams and deliver for the millions we serve.

— Bharat Masrani, Group Chairman and CEO, TD

“We have built a very strong business at First Horizon, and by joining forces with TD, we will create extraordinary value for our key stakeholders through a shared customer-centric strategy, enhanced scale and a set of wider products for our customers. It’s a real growth story. We have long respected TD as a leader in US banking and are confident that its continued and growing investments in our local markets will continue our long tradition of community support. Thank you to our associates at First Horizon for their efforts and dedication to our customers and communities as we continue to deliver to them every day. We look forward to completing this transaction and are delighted to join TD. »

— Bryan Jordan, President and CEO of First Horizon

“I am delighted to welcome the associates, executives and valued customers of First Horizon to TD once the transaction is complete. As a single team, with complementary businesses, distribution channels and a shared culture of world-class customer service, we will chart the next phase of growth together. The Southeastern United States represents a tremendous opportunity for TD and the addition of First Horizon’s commercial and specialty banking capabilities will position us as a leading national player in commercial banking. We will combine our resources and capabilities and continue to invest in the region while focusing on delivering the most differentiated banking experience in our markets.

— Leo Salom

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

Comments are closed.