First Horizon shares fall 50% after failed TD Bank merger

New York (CNN) First Horizon and TD Bank have called off a $13 billion deal that would have formed America’s sixth-largest bank, adding to the turmoil sweeping regional lenders across the country.

Caught in the worst banking crisis since 2008, Prime Horizon (MFA) The stock price has fallen about 40% in the past two months, falling well below the $25 per share offered by TD when the takeover was announced in February 2022.

The stock closed at $15.05 a share on Wednesday and plunged another 36% on Thursday after the deal was mutually abandoned by the banks.

First Horizon is a regional lender in the southeastern United States and has reportedly helped Canadian TD expand south of the border. But regional banks have lost investor and customer confidence since the March collapse of Silicon Valley Bank and Signature Bank.

On Monday, a third regional bank, First Republic, went bankrupt and JPMorgan bought most of its assets. A fourth, PacWest Bank confirmed earlier Thursday that it was looking for a financial lifeline.

First Horizon said it remained stable, cash-rich and diversified.

“While today’s announcement is unfortunate and unexpected, First Horizon will continue to grow by operating from a position of strength and stability,” First Horizon CEO Bryan Jordan said in a statement. .

TD said in a statement that the companies called off the merger due to a surprisingly long regulatory approval process. Without an approval timeline, companies began to wonder if the deal would get regulators’ blessing. TD said the regulatory issue was for “reasons unrelated to First Horizon.”

In an interview with CNBC, Jordan agreed that he doesn’t believe the deal was called off because TD Bank wanted to avoid buying First Horizon as regional bank stocks plunged.

“We weren’t able to get an approval timeline and we came to this agreement,” Jordan said. “We never assumed regulatory approval was a given. We always knew there was a risk in this process.”

He added that he believed the banking sector remained strong and that First Horizon had not taken significant changes to tighten its lending standards.

“I think things will stabilize, it’s just going to take time,” Jordan said. “At the same time, we are seeing a contraction in margins, simply because of the tightening of financial conditions.”

Although TD did not directly cite the banking crisis or First Horizon’s eroding market value as the reason for abandoning the purchase, CEO Bharat Masrani said in a statement that the decision brings comfort. “clarity” to its customers and shareholders.

TD will pay First Horizon a break fee of $200 million plus $25 million in reimbursement fees.

Shares of other regional banks have fallen in recent days after the failure of the First Republic. Investors are waiting for the next shoe to drop. Early Thursday, California-based PacWest Bank said it was exploring “all strategic options” after its stock price was halved after hours trading following a Bloomberg report that she was considering a sale.

PacWest’s (PACW) the stock was nearly halved on Thursday, while Western Alliance Bank (WALL)another regional competitor, fell more than 20%.

As the Fed raised interest rates to fight inflation, the value of loans and bonds from regional lenders plummeted. Customers transferred their money to larger banks, leaving some regional banks without the money they needed to pay withdrawals.

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