TD’s all-of-the-above U.S. growth method

Toronto-Dominion Bank is taking the viewpoint when it concerns U.S. growth strategies.

Case in point: Tuesday’s statement that the second-largest Canadian bank prepares to purchase U.S. brokerage Cowen for $1.3 billion in money, even as macroeconomic conditions and market volatility have actually suppressed capital markets activity, and even while TD waits for regulative approval to purchase First Horizon Corp. in an offer that would develop among the biggest banks in the United States.

The acquisition of Cowen, an independent broker, provides 2 abilities that TD wishes for — a recognized U.S. equity sales and trading platform and a worldwide research study platform, stated Glenn Gibson, vice chair and local head of TD Securities, the financial investment banking arm of TD.

To spend for the Cowen acquisition, TD offered 28.4 million non-voting typical shares in Charles Schwab, lowering its ownership interest in Schwab from 13.4% to 12%.


TD has actually been broadening its capital markets company for many years, and U.S. equities and research study were a few of “the last pillars” essential to make it a full-service company line, Gibson stated. So it made good sense to pursue an offer now in order to speed up development.

“These opportunities, whether they come along in frothy times or softer times, what’s important is that we’re adding to our capabilities for the long term,” Gibson stated in an interview Tuesday. “We’re committed to the U.S.”

With Cowen, TD is set to include 1,700 workers to its TD Securities lineup, which presently consists of about 5,000 workers. Of those 1,700, about 300 are handling directors, TD stated.

After the acquisition, which is anticipated to close throughout the very first quarter of 2023, Cowen CEO Jeff Solomon will enter into the senior management group at TD Securities and will report to Riaz Ahmed, who is president and CEO of TD Securities, the 2 business stated in a news release.

The offer is anticipated to yield expense savings of in between $300 million and $350 million, according to TD. Pre-tax combination and retention expenses are predicted to amount to $450 million, consisting of $200 million connected to the retention of Cowen’s management group and other “key individuals” at the company, TD stated.

To spend for the Cowen offer, TD offered 28.4 million non-voting typical shares in Charles Schwab for profits of about $1.9 billion. The sale decreased TD’s ownership interest in Schwab from 13.4% to 12%, however it did not alter TD’s method around the financial investment, executives stated. 

TD’s most current acquisition comes less than 6 months after it revealed an offer to purchase Memphis, Tennessee-based First Horizon for $13.4 billion. If regulators authorize the purchase, the combined business would end up being a top-six bank in the United States with roughly $614 billion of properties.

But there has actually been some pushback on the proposed tie-up in the middle of increased examination of bank mergers. Last month, Sen. Elizabeth Warren, D-Mass., and other legislators prompted the Office of the Comptroller of the Currency to turn down the offer.

In a letter, the Democratic legislators pointed out a May 4 report by Capitol Forum that discovered TD utilized comparable worker rewards as those that added to the fake-accounts scandal at Wells Fargo.

TD executives initially targeted a fall 2022 closing date, and on Tuesday they restated that schedule. 

“We obviously cannot talk about our conversations with our regulators, but feel comfortable that [it] is proceeding at the pace we expected and we are hoping that we can close it” as prepared, CEO Bharat Masrani stated throughout a call with experts to go over the Cowen offer.

The reality that TD is pressing forward with a different deal while still waiting for a thumbs-up on First Horizon must signify great news for the latter offer, stated Ebrahim Poonawala, an expert at Bank of America Securities.

“If they saw any significant red flags” with First Horizon, “why would they have announced another deal if the first wasn’t going as planned?” Poonawala stated in an interview Tuesday.

Some experts wondered about how TD will handle 2 pending offers at the same time. Paul Holden, an expert at CIBC World Markets, would like to know if TD’s management group will be “stretched,” considered that the 2 deals are anticipated to be completed around the very same time.

TD executives stated they do not visualize troubles. The Cowen offer “is more about capabilities that are additive,” Masrani stated.

“This is not about taking synergies out or building out different types of platforms,” he included. “We feel very comfortable … to proceed on the basis we’ve outlined.”


A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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