Canadian invasion
Canada-based TD Bank (formerly Toronto Dominion) has made another incursion across the US border, this time to buy Philadelphia area regional bank Commerce Bank. The deal is for $8.5 million (US) in cash and stock. It would be the largest bank takeover by a Canadian company,
According to a Bloomberg story ("Toronto-Dominion Agrees to Buy Commerce Bancorp", 10/02/07)
Toronto-Dominion's acquisition would be the third-largest foreign transaction for a Canadian company, trailing Manulife Financial Corp.'s purchase of John Hancock Financial Services in 2003 and the takeover of Reuters Group Plc by Thomson Corp. this year, according to data compiled by Bloomberg
Commerce, which was founded with one branch in 1994, grew to 460 branches by 2007. The buyout will make TD Bank, which is the #3 bank in Canada in terms of deposits, into the #7 bank in North America in terms of branch locations (over 2,100). TD had in 2004 purchased a majority share in Banknorth, a major New England regional bank with over 550 branches. And recently bought the remaining shares, altogether a deal worth over $5 billion. In 2004, TD Bank bought US-based online broker E-Trade.
The bank was bought under special circumstance. Commerce CEO Vernon Hill was recently ousted, under a cloud from banking investigations and some mixings in the notoriously corrupt game of New Jersey politics.
This buyout illustrates several points we have previously noticed. Regional banks, once they grow to a certain heft, are major takover targets and all of them are in play. Second, the weakness of the US dollar, even against the Canadian dollar, is leading to an increased interest in picking up devalued US assets. Third, despite the drop in the acquisitions market, strategic purchases by companies who have access to cash are a better deal than ever, thanks to less competition bidding up prices. Indeed, the purchase price in this case was around 10% higher than the price of Commerce stock.
