COWN - TD Bank signs $1.3B deal to acquire Cowen to step up U.S. growth strategy

TD Bank ( NYSE: TD ) confirms on Tuesday an agreement to buy Cowen ( NASDAQ: COWN ), a New York-based financial services firm, in an all-cash transaction valued at US$1.3B that will accelerate the Canadian bank's growth strategy in the U.S. with Cowen's investment bank and complementary products and services.

The Toronto-based bank will pay US$39 per share of Cowen's ( COWN ) common stock. The deal is expected to be "modestly accretive" to TD's 2023 adjusted EPS and generate ~14% adjusted return on invested capital on a fully-synergized run rate basis. TD ( TD ) expects to achieve US$300M-$350m in revenue synergies by year three. It also expects pretax integration and retention costs of ~US$450M over three years.

"Cowen is a leading independent dealer with a premier U.S. equities business and a strong, diversified investment bank that, when combined with TD Securities, will allow us to accelerate our strategic U.S. growth plans," said TD Bank Group ( TD ) President and CEO Bharat Masrani

To help fund the deal, TD ( TD ) has sold 28.4M non-voting common shares of Charles Schwab ( SCHW ) for proceeds of ~$1.9B, recuing TD's stake in Schwab to 12.0% from 13.4%.

The purchase price represents a 1.7x multiple of Cowen's ( COWN ) tangible book value as of March 31, 2022 and a 8.1x multiple of Cowen's 2023 earnings.

Conference call at 8:30 AM ET.

The Wall Street Journal had reported the agreement late Monday.

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