() — First Horizon and TD Bank have canceled a $13 billion deal that would have formed the sixth-largest bank in the United States, adding to the turmoil affecting the country’s regional lenders.
Caught in the worst banking crisis since 2008, First Horizon’s share price has plunged 40% in the past two months, well below the $25 TD offered when the acquisition was announced in February 2022.
The shares closed at $15.05 a share on Wednesday and plunged another 40% in morning trading on Thursday after the banks mutually abandoned the deal.
First Horizon is a regional lender in the southeastern United States and reportedly helped Canada’s TD expand south of the border. But regional banks have been losing investor and customer trust since the March collapse of Silicon Valley Bank and Signature Bank.
On Monday, a third regional bank, First Republic, collapsed and JPMorgan bought most of its assets. A fourth bank, PacWest Bank, confirmed Thursday that it is looking for a financial lifeline.
First Horizon said it remains stable, cash rich and diversified.
“While today’s announcement is unfortunate and unexpected, First Horizon will continue on its path of growth by operating from a position of strength and stability,” the bank’s CEO Bryan Jordan said in a statement.
TD said in a statement that the companies called off the merger due to an unexpectedly long regulatory approval process. With no timetable for approval, the companies began to question whether the deal would win approval from regulators. TD said the regulatory issue was for “reasons unrelated to First Horizon.”
Although TD did not directly cite the banking crisis or First Horizon’s plummeting market value as the reason for abandoning the purchase, chief executive Bharat Masrani said in a statement that the decision provided “clarity” to its customers and shareholders.
TD will pay First Horizon a break fee of $200 million plus $25 million in redemption fees.
Shares of other regional banks have tumbled in recent days following the First Republic bankruptcy. Investors are waiting for another similar event to happen. This early Thursday, California-based PacWest Banksaid it is exploring “all strategic options” after its share price halved in after-hours trading following a Bloomberg report that it was considering a sale.
PacWest’s shares nearly halved on Thursday, while Western Alliance Bank, another regional competitor, fell more than 20%.
As the Federal Reserve raised interest rates to combat inflation, the value of loans and bond holdings from regional lenders plummeted. Clients had been moving their money to larger banks, leaving some regional banks without the cash they need to pay for withdrawals.
