The ongoing turmoil in the U.S. regional banking industry claimed an M&A victim last week, even as four other deals were completed successfully. Although in some sense it wasn’t as much as the current rout in regional banking stocks as regulators dragging their feet that killed the deal.
On Thursday, May 4, 2023, TD Bank (TD) and First Horizon (FHN) mutually terminated their transaction, stating that TD did not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon. First Horizon’s CEO Bryan Jordan said that the banking industry crisis was not the reason for the termination of the deal.
Shares of FHN fell almost 40% after the termination was announced. The timing of the failure came as a big surprise to me because calling off the merger during a week when it looked like other dominoes were likely to fall caused First Horizon’s stock to drop sharply and it was trading well below tangible book value. The stock recovered somewhat towards the end of the week.
The all-cash deal, announced in February 2022, valued First Horizon at $13.4 billion. Shareholders of First Horizon were supposed to receive $25 per share under the terms of the agreement. The merger agreement also stated that, if the transaction did not close prior to 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.
TD will pay a termination fee of $200 million to First Horizon in cash, in addition to the $25 million fee reimbursement due to First Horizon according to the merger agreement.