Canada’s Biggest Banks Are Spending Billions On M&A To Build Their Footprint In The U.S. – Forbes

There’s no end in sight to a pandemic-fueled wave of consolidation among North America’s retail banks.

The latest example comes from Toronto-Dominion Bank, which struck a deal Monday to buy First Horizon FHN for $13.4 billion in cash. The move marks a major geographic expansion for TD from its roots in Canada into the Southeast U.S., where First Horizon operates the bulk of its 412 branches.

It’s set to be TD’s largest acquisition ever, with the price of $25 per share representing a 37% premium to the closing price of First Horizon shares last Friday. Based in Memphis, Tenn., First Horizon claims $89 billion in assets and more than 1.1 million customers. The addition will give TD one of the six largest footprints of any bank in the U.S., with $614 billion in assets and more than 1,500 locations in the country.

It’s the second time in the past few months that a major Canadian bank has swooped down south to scoop up a mega-deal. In December, Bank of Montreal agreed to spend $16.3 billion to buy Bank of the West and its 1.8 million U.S. customers from BNP Paribas.

Both TD and BMO plan to fund their takeovers with cash stockpiles that have grown substantially over the past two years. As a safeguard against fears of financial calamity, Canada’s government restricted the nation’s banks from buying back shares or increasing dividend payouts during the worst days of the pandemic. The moratorium was lifted in November, but in the meantime, many large institutions added billions to their cash reserves.

And now, they’re spending it.

A bevy of other banking takeovers have also taken place over the past year, as financial institutions continue their never-ending hunt for scale. Such consolidation was made much more feasible in 2018, when Congress dialed back some of the regulations of the Dodd-Frank Act by raising the threshold of banks it considers “too big to fail” from $50 billion in assets to $250 billion. The growth of digital banking has also been a driver of deals, as institutions aim to keep pace with rivals new and old amid a rapidly shifting landscape.

The buying binge has included regional banks all across the U.S., with companies based in Minnesota, Alabama and Oregon emerging as a few recent targets. In early February, Webster Bank WBS completed a roughly $10.3 billion purchase of Sterling Bank. Last October, Columbia Bank agreed to buy Umpqua Bank UMPQ for $5.1 billion. Last June, Huntington Bancshares closed a takeover of TCF Financial TCF worth around $6 billion. All three were all-stock deals, in contrast to the larger cash purchases by TD and BMO.

Elsewhere, PNC Financial Services PNC bought BBVA USA Bancshares last June for $11.6 billion. And last September, US Bank signed on to acquire MUFG Union Bank for about $8 billion.

Add it all up, and you get seven banking mega-deals in less than a year with a combined worth of more than $70 billion.

Source: forbes.com