Canada’s TD Bank sees US expansion with $1.3 billion acquisition of Cowen.

The TD Bank logo is seen on the Toronto Dominion Canada Trust Tower in Toronto, Ontario, Canada on March 16, 2017. Image taken on March 16, 2017. REUTERS/Chris Helgren/File photo

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Aug 2, 2010 Canada’s Toronto Dominion Bank said it will buy New York-based boutique investment bank Cowen Inc ( COWN.O ) for $1.3 billion in cash, as it seeks to boost its presence in the high-growth US. Market.

The deal is TD’s second in the United States this year, and Canada’s second-largest lender by market value has made no secret of its desire to expand in the world’s largest economy. TD will cover $1.9 billion in proceeds from the sale of Charles Schwab stock, it announced Monday.

Canada’s major banks have been in the market south of the border in the past year, looking for growth away from home, with the Big Six banks controlling about 90% of the market. Read more

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National Bank Financial analysts said the deal would provide “value diversification” to TD’s US capital markets business, but cited integration as a key risk, which is “difficult when it involves investment banking operations with different cultures.”

In February, TD said it would buy Memphis-based First Horizon Corp ( FHN.N ) for $13.4 billion, its largest acquisition yet. Read more

Following the First Horizon deal, investors expressed concerns about the merger. Read more

Cowen’s consensus values ​​the target at $39, a 10% premium to its last closing price. Cowen shares rose 8.9 percent in New York morning trading. TD shares were down 1.3 percent.

Credit Suisse analyst Ju Ho Kim wrote in a note.

On Monday, TD said it was selling 28.4 million Schwab shares, reducing its ownership from 13.4% to 12%. That stake was the result of Schwab’s purchase of TD Ameritrade, of which TD owns 43 percent. TD said it has no plans to sell additional Schwab shares.

TD expects pre-tax integration costs to be around $450 million in three years and revenue synergies of $300-350 million in the third year.

TD must pay a termination fee of $42.25 million if it cancels the deal due to a change of opinion or other outstanding proposal.

The deal is expected to close in the first quarter of 2023.

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Reporting by Nicola Saminator in Toronto and Manya Sani in Bengaluru; Editing by Aditya Soni and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

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