Under the terms of the deal, TD will pay US$1.3 billion, or US$39 per share, in cash to buy the New York-based investment bank. TD said it sold 28.4 million shares of The Charles Schwab Corp. to finance the transaction. As a result, TD said the deal will be Common Equity Tier 1 neutral. “Cowen is a leading independent dealer with a leading U.S. equities business and a strong, diversified investment bank that, when combined with TD Securities, will enable us to accelerate our strategic growth plans in the U.S.,” said Chairman and CEO of TD, Bharat Masrani. a liberation. The deal has been a source of speculation for weeks after Bloomberg News reported in early July that talks were underway. The Wall Street Journal reported late Monday that a deal worth more than $1 billion could be announced as early as today. Paul Harris, a partner and portfolio manager at Toronto-based Harris Douglas Asset Management, said the scale of TD’s U.S. investment banking ambitions will go a long way in determining the success of the Cowen deal. “Is it really a deal to help their existing client base grow and help them with investment banking, corporate finance, etc.? Is that the goal? Or is the goal to say we want to be a big investment bank in the United States? And I think if that’s the case, I think it’s going to be very difficult. … And so if you’re going to compete with Goldman (Sachs), I think that would be very bad, or with Morgan Stanley or JP Morgan.” Harris, whose company owns stock in TD, added that the Cowen deal would likely “look terrible” in a few years if TD has any intention of trying to compete with those Wall Street giants. TD said the Cowen purchase would be “modestly” accretive to fiscal 2023 adjusted earnings per share and that it expects up to $450 million in pre-tax completion and holding costs over a three-year period. The transaction, which TD said is expected to close in the first quarter of next year, is subject to regulatory approvals in Canada and the United States, as well as a vote by Cowen shareholders. “The reality is that by selling its stake to Schwab, [TD] it simply trades some exposure to US wealth for exposure to the US capital market. The diversification inherent in this trade is not necessarily a bad thing, although we note that the market generally prefers wealth to capital markets, especially after a historic cycle of mergers and acquisitions. Furthermore, the track record of successful cross-border capital markets acquisitions is thin, with retention of individuals the key medium- to long-term hurdle,” Scotia Capital analyst Meny Grauman wrote in a note to clients. . Cowen is the second major US acquisition that TD has disclosed this year. In February, the Canadian bank announced it had agreed to buy First Horizon Corp. based in Memphis for $13.4 billion. This deal is still awaiting final regulatory approvals.
