TD buys another U.S. bank
Latest deal will give TD more branches south of the border
Published On Mon May 17 2010
Madhavi Acharya-Tom Yew
Business Reporter
TD Bank Financial Group continues to hunt up bargains south of the border, announcing Monday that it has struck a deal to acquire South Financial Group Inc. for $191.6 million (U.S.)
The deal comes less than a month after the bank picked up three troubled banks in Florida – a buying spree that will give TD more branches in U.S. than in Canada when the transactions close later this year.
The Canadian bank will pay $61 million (U.S.) in cash or stock to shareholders of South Carolina-based South Financial and $130.6 million (U.S.) to the U.S. Treasury Department, the bank said.
TD Bank Financial Group continues to hunt up bargains south of the border, announcing Monday that it has struck a deal to acquire South Financial Group Inc. for $191.6 million (U.S.)
The deal comes less than a month after the bank picked up three troubled banks in Florida – a buying spree that will give TD more branches in U.S. than in Canada when the transactions close later this year.
The Canadian bank will pay $61 million (U.S.) in cash or stock to shareholders of South Carolina-based South Financial and $130.6 million (U.S.) to the U.S. Treasury Department, the bank said.
“This transaction represents another key milestone as we continue to build out our U.S. franchise,” said Ed Clark, TD Bank president and chief executive.
In keeping with a recent decree from Canada’s top banking regulator, TD plans to fund its latest purchase by selling $250-million (Canadian) worth of stock domestically, rather than dipping into its capital reserves.
TD announced in mid-April that it would buy the assets and liabilities of Riverside National Bank of Florida, First Federal Bank of North Florida, and AmericanFirst Bank from the Federal Deposit Insurance Corp. The agency also brokered a deal between the U.S. arm of BMO Financial Group and Illinois-based Amcore Bank.
The latest deal, which will give TD commercial banking assets and a network of branches from Maine to Florida, “is a pretty good way for them to pick up assets in a distressed environment without really having to dip into the capital well to do it,” said Craig Fehr, banking analyst with Edward Jones Fehr.
It is critical that Canadian banks broaden their operations, he added. “Canada is very profitable but it’s a very mature market.”
South Financial, a casualty of the credit crunch, has $8 billion (U.S.) in loans and $9.8 billion in deposits.
“I think they understand this business very well, so I’m comfortable with where they’re going,” said Martin Hubbes, chief investment officer of AGF Investments Inc. “Time will tell. We will not know for the next two or three or five years whether this is wise or not. These things take time to resolve.”
Hubbes manages AGF’s Canadian Stock and Canadian Stock Class funds, both of which hold TD Bank shares.
Unlike previous deals, this does not involve loan guarantees through the FDIC.
“TD is taking on incremental credit exposure, in the U.S. Southeast, which has been one of the hardest hit regions, and this time without any loss sharing agreement with the government,” analyst John Aiken of Barclays Capital wrote in a note to clients.
TD Bank will have about 1,300 branches in the U.S., compared with about 1,100 in Canada, when the transactions close later this month.
“This is a relatively small acquisition and exactly the kind of unassisted transaction that we’ve said we’re comfortable doing,” Clark said. “After undertaking extensive due diligence, we’re confident that this is an attractive opportunity that fits within our framework of only taking risks that we can clearly understand and manage.”
