Toronto-Dominion primed for price cut on First Horizon deal

BLOOMBERG

Toronto-Dominion (TD) Bank may seek a lower price for First Horizon Corp, but it still has an incentive to close the deal, according to a Canadian asset manager who specialises in financial stocks.
“The reasons they wanted to buy in the first place haven’t gone away. Tennessee and Florida and the Carolinas are still great banking markets,” Robert Wessel, managing partner of Hamilton Capital Partners Inc, said in an interview. “It fits very nicely with the geography of TD’s US platform.”
First Horizon has been trading far below the $25-per-share takeover offer since early March, when the Memphis-based bank said Toronto-Dominion doesn’t expect to receive regulatory approvals for the deal by a May 27 deadline. A little more than a week later, Silicon Valley Bank failed, setting off a crisis of confidence in US regional lenders.
First Horizon was trading at $17.70, implying that traders believe the deal will fall apart or be repriced lower. Wessel, whose firm manages about C$2.2 billion ($1.6 billion), said a price renegotiation is the “most likely outcome.”
That also fits with the view of analysts such as Paul Holden at CIBC Capital Markets, who argued in a note to clients earlier this month that Toronto-Dominion would need a minimum 10% price cut, to $22.50 a share, to “stay engaged.”