SCHW - TD Bank 'very likely' to seek price cut in First Horizon deal price - analyst

2023-04-13 10:12:50 ET

TD Bank ( NYSE: TD ) is "very likely" to seek a price reduction for its planned $13.4 billion acquisition of First Horizon ( NYSE: FHN ) given recent events in the U.S. banking sector, according to a KBW analyst. First Horizon rose 1.8% , while TD gained 0.9%.

A $3 price reduction to $22 a share "appears reasonable," KBW analyst Mike Rizvanovic wrote in a note on Thursday. A $3 cut would push TF's CET 1 ratio about 11%, assuming an end of Q3 close. KBW Rizvanovic's estimates that each $1 share reduction in the the offer price for FHN adding ~12 bps to TD's CET 1 ratio.

The KBW analyst, who has an outperform rating on TD, also sees a partial Charles Schwab ( SCHW ) sale as an alternative option as "very unlikely" given the stock's material selloff.

The KBW comments come as TD Bank CEO Bharat Masrani reiterated his commitment to completing the acquisition of First Horizon ( FHN ) at a meeting with Bank of America on Wednesday.

Masrani's comments at the TD luncheon sent First Horizon ( FHN ) up as much as 4.6% on Wednesday, though they ended up rising 1.1%. Traders told Seeking Alpha that Masrani didn't address a potential price adjustment for the First Horizon deal or regulatory issues t hat have delayed the close of the deal.

First Horizon shares dropped 11% on March 1 after TD Bank ( TD ) said it didn't expect to receive regulator approval in time to complete its $13.4 billion acquisition by t he May 27 deal termination deadline.

For further details see: