Stock in First Horizon falls after a failed merger with TD Bank. The $13 billion merger between First Horizon and TD Bank has been called off, adding to the instability affecting regional banks nationwide.
The share price of First Horizon (FHN) had dropped by almost 40% over the past couple of months, significantly below the $25 per share that TD gave when the purchase was announced in February 2022, as the company has been caught up in the most extensive banking crisis since 2008.
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After the banks mutually abandoned the deal on Wednesday, the stock plummeted the next day, closing at $15.05 per share.
TD may have gotten a foothold in the American market with the support of First Horizon, a regional lender in the southeastern United States. Since Silicon Valley Bank and Signature Bank failed in March, investor and customer confidence in regional banks has steadily declined.
On Monday, First Republic, the third regional bank to fail, had most of its assets purchased by JPMorgan. Earlier Thursday, a fourth institution, PacWest Bank, announced it sought emergency funding.
According to First Horizon, it is still a secure company with plenty of cash and options.
“While today’s announcement is unfortunate and unexpected, First Horizon will continue on its growth path operating from a position of strength and stability,” First Horizon CEO Bryan Jordan said in a statement.
Due to lengthy regulatory approval procedures, companies called off the merger, TD said in a statement. The corporations wondered if the acquisition would be greenlit without knowing when they could expect clearance. TD claimed that the regulatory issue arose for “reasons unrelated to First Horizon.”
In an interview, Jordan said that he doesn’t think TD Bank wanted to avoid buying First Horizon when regional bank stocks plunged, so the deal was called off.
Because “we were unable to get a timeline for approval, and we reached this agreement,” Jordan explained, “we came to this conclusion.” We never thought getting the regulatory green light was a foregone conclusion. The possibility of something going wrong was always on the table.
He went on to say that he is confident in the continued health of the banking industry and that he has not noticed any significant changes in First Horizon’s approach to lending.
In the end, “I think things will stabilize; it’s just going to take some time,” Jordan added. “At the same time,” he continued, “we are seeing around the margins that contraction is occurring just because of the tightness of financial conditions.”TD’s CEO Bharat Masrani said the decision brought “clarity” to its clients and shareholders. However, the bank didn’t specifically blame the banking crisis or First Horizon’s falling market value.
A $200 million breakup fee and $25 million in reimbursement payments will be paid by TD to First Horizon.
Following First Republic’s demise, shares in other regional banks have fallen. They are waiting for the other shoe to drop before investing. In the early hours of Thursday, California’s PacWest Bank stated it is investigating “all strategic options” after a Bloomberg story said the bank’s stock had dropped 50 percent following news that it was considering being sold.
On Thursday, investors decreased their holdings in PacWest (PACW) and Western Alliance Bank (WAL), two regional rivals.
The value of loans and bond holdings held by regional banks has plummeted as the Federal Reserve has raised interest rates to combat inflation. Some smaller banks had run out of money because customers had transferred their accounts to larger financial institutions.
