TD Bank eyes further U.S. expansion with $1.3-billion Cowen purchase
Canada’s Toronto Dominion Bank said it will buy New York-based boutique investment bank Cowen Inc. for $1.3 billion in cash, seeking to boost its presence in the highgrowth U.S market.
The deal marks TD’s second acquisition bid in the United States this year and the Canada’s second-largest lender by market value has made no secret of its ambitions to expand in the world’s biggest economy. TD will fund the acquisition from the $1.9-billion proceeds from the sale of shares of Charles Schwab, announced on Monday.
Canada’s major banks have been on a shopping spree south of the border in the past year, seeking growth away from home, where the Big Six banks control nearly 90 per cent of the market.
National Bank Financial analysts said the deal provides “valuable diversification” of TD’s U.S. capital markets business, but flagged integration as a primary risk, saying it is “notoriously difficult when involving investment banking operations with different cultures.”
In February, TD said it would buy Memphis-based First Horizon Corp. for $13.4 billion in its biggest ever acquisition.
Investors had already expressed concern around integration following the First Horizon deal.
The Cowen deal values the target at $39 a share, a nearly 10 per cent premium to its last closing price.
Cowen shares rose 8.9 per cent in morning trading in New York. TD shares slipped 1.3 per cent.
The transaction is “modestly positive (for TD), especially given that it is on-strategy with the bank’s push into its U.S.-dollar platform,” Credit Suisse Analyst Joo Ho Kim wrote in a note.
On Monday, TD said it was selling 28.4 million shares of Schwab, reducing its ownership to about 12 per cent from 13.4 per cent. That stake was the result of Schwab’s purchase of TD Ameritrade, of which TD owned 43 per cent. TD said it has no current plans to sell more Schwab shares.
TD expects pre-tax integration costs of about $450 million over three years, and revenue synergies of $300 million to $350 million by the third year.