Toronto-Dominion (TD) & Cowen (COWN) Get Nod for Merger Deal
The Toronto-Dominion Bank’s TD merger deal with Cowen Inc. COWN has received all regulatory approvals. The all-cash deal, expected to close on Mar 1, is valued at $1.3 billion.
The transaction, announced in August 2022, will accelerate TD’s long-term growth strategy in the United States by acquiring a high-quality and rapidly growing investment bank with outstanding talent and highly complementary products and services. Further, TD Securities’ (Toronto-Dominion's subsidiary) existing depth and breadth in global market research capabilities will benefit from COWN’s complementary and highly diverse equity research franchise.
Further, in relation to the deal, Toronto-Dominion had sold 28.4 million non-voting common shares of Charles Schwab SCHW for $1.9 billion. This lowered its ownership interest in Schwab from 13.4% to 12%.
Notably, TD’s strategy with respect to its investment in SCHW has not changed, and it has no current intention to divest additional shares.
At the time of announcing the deal, Toronto-Dominion expected it to be modestly accretive to the 2023 adjusted earnings on a fully-synergized basis. It will generate approximately 14% adjusted return on invested capital on a fully-synergized run-rate basis. The company expects to achieve $300-$350 million in revenue synergies by year three. Total pre-tax integration and retention costs of $450 million are anticipated to be incurred over three years.
Our Take
Of late, TD is on an expansion spree. The company, in March 2022, announced a definitive agreement to acquire First Horizon Corporation FHN in an all-cash transaction valued at $13.4 billion. The transaction is yet to get regulatory approvals, and this has resulted in the extension of the closure to May 2023 from February 2023.
The deal will foster TD’s footprint expansion in South Carolina and Florida while providing entry into Tennessee, Louisiana, Texas, Alabama and Georgia. Collectively, the population in First Horizon's markets is expected to advance 50% faster than the U.S. national average. This offers significant growth opportunities for Toronto-Dominion.
Driven by these expansion initiatives, Toronto-Dominion will continue to record solid revenues across diverse footprints and businesses. Also, higher interest rates will offer support.
Over the past six months, shares of TD have gained 1.1% and that of COWN has rallied 1.2%.
Image Source: Zacks Investment Research
Currently, Toronto-Dominion carries a Zacks Rank #2 (Buy), while Cowen has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
First Horizon Corporation (FHN) : Free Stock Analysis Report
Toronto Dominion Bank (The) (TD) : Free Stock Analysis Report
Cowen Group, Inc. (COWN) : Free Stock Analysis Report
