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Focus Financial Partners To Be Taken Private – Merger Arbitrage Mondays

  • March 6, 2023

Toronto-Dominion Bank (TD) Delayed Acquisition of First Horizon Corporation (FHN)

Bank deals usually take a long time to close and sometimes test the patience of both arbitrageurs and the companies involved in the transaction. We saw this with the merger of two Pacific Northwest banks where Columbia Banking System announced the acquisition of Oregon based Umpqua Bank on October 12, 2021. I had banked with Umpqua for several years before the deal was announced, had written about the company more than a decade ago and also got a chance to interview their ex-CEO Raymond Davis for an article. I considered this to be a relatively small deal with $50 billion in total assets at announcement but the deal took 505 days to complete and finally closed last week.

A little over a year ago First Horizon Corporation and The Toronto-Dominion Bank entered into a definitive agreement for TD to acquire First Horizon in a $25 per share all-cash transaction valued at US$13.4 billion. The deal was initially expected to close on November 27, 2022 and under the terms of the merger agreement, if the transaction did not close by November 27, 2022, First Horizon shareholders would receive, at closing, an additional US$0.65 per share on an annualized basis for the period from November 27, 2022 through the day immediately prior to the closing. In other words this was like the monthly ticking fee we saw with Standard General’s acquisition of TEGNA. The presence of this ticking fee implied that both TD and First Horizon were aware that the deal was likely to take long to close.

Shareholders of First Horizon approved the deal on May 31, 2022. The deal started facing regulatory issues on July 15, 2022, when lawmakers led by Sen. Elizabeth Warren asked a key regulator to block Toronto-Dominion Bank’s acquisition of First Horizon Corporation, because of allegations of customer abuse.

On February 9, 2023, the companies mutually agreed to extend the outside date of their proposed transaction from February 27 to May 27, 2023. When First Horizon (FHN) filed its 10-K on March 1, 2023, it included the following section on page 5 of its annual report:

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