Toronto-Dominion Bank (TD) has officially canceled its $13.4 billion U.S. acquisition of American regional lender First Horizon Corp. (FHN).
In a news release, TD Bank said that it and First Horizon have mutually agreed to terminate the deal.
TD also said that it will pay First Horizon $200 million U.S. in cash on top of a $25 million U.S. fee it previously agreed to pay when the merger was first announced in February 2022.
The purchase of First Horizon had been in doubt for weeks following the collapse of several U.S. regional lenders such as Silicon Valley Bank, Signature Bank, and, most recently, First Republic Bank.
Analysts and some shareholders had publicly called for TD to cancel the deal to buy First Horizon or renegotiate the terms in the wake of the U.S. banking turmoil.
Based in Memphis, Tennessee, First Horizon is the fourth largest regional bank in the U.S. Southeast. The bank provides consumer and small business banking services, including mortgages and insurance.
TD Bank had been awaiting regulatory approval of its takeover of First Horizon prior to it terminating the deal.
TD’s stock had become one of the most shorted among professional traders, with about 5.5% of its outstanding shares having been sold short, according to ORTEX data.
Hedge fund bets that TD Bank’s stock would fall increased nearly 50% since mid-March.
Hedge funds and traders profit when they borrow a stock from an investor and sell it back when the price drops, pocketing the difference. This is a widely used practice known as short selling.
TD Bank’s stock has fallen 14% over the last year to trade at $81.47 per share.
First Horizon’s stock has declined 33% in the past 12 months to $15.05 U.S. a share. The bank’s stock dropped a further 47% in premarket trading on news that TD has canceled its plan to buy the lender.
