Combination of Commerce Bancorp and TD Bank Financial Group Creates North American Powerhouse and Offers Superior Value Creation.
TD Bank Financial Group(TDBFG) (TSX and NYSE: TD) and New Jersey-based Commerce Bancorp Inc.(NYSE: CBH) today announced that they have signed a definitive agreement for TDBFG to acquire Commerce Bank in a 75% stock and 25% cash transaction valued at US$8.5 billion.
"Acquiring Commerce Bank offers a singularly unique and compelling opportunity for our shareholders - one that is both a strategic fit and a superior value creation opportunity through accelerated organic growth. The combination of Commerce with TD Banknorth doubles the scale of our US banking business and accelerates our transformation to a leading North American financial institution," said Ed Clark, President and Chief Executive Officer, TD Bank Financial Group. "Commerce brings an impressive geographic footprint and market share in a contiguous region and a complementary North American retail banking business model."
The addition of Commerce Bank would give TD Bank Financial Group more than 2,000 branches in North America and approximately one-quarter of a trillion dollars in deposits, making it the first bank with critical mass in both the Canadian and US markets. TD Bank Financial Group will become the seventh largest bank in North America as measured by branch locations.
"Our joining forces with TD Bank Financial Group opens the door to tremendous new growth opportunities," said Dennis DiFlorio, Chairman, Commerce Bank N.A. "Combining TD's broad array of sophisticated retail and commercial products with our unparalleled banking convenience is truly exciting. We are delighted for our customers, employees and shareholders."
Commerce Bancorp TD Bank Financial Group Transaction
Under the agreement, Commerce shareholders will receive 0.4142 shares of a TD Bank common share and US$10.50 in cash in exchange for each common share of Commerce Bancorp Inc. The consideration was negotiated on the basis of US$42.00 per share value for Commerce Bank. The transaction value based on the October 1, 2007 closing price of TD common shares is $42.37. The transaction will be taxable for Commerce shareholders for US federal income tax purposes, including the TD shares they receive.
Following the completion of the transaction, TDBFG expects to take a one time restructuring charge of approximately US$490 million pre-tax. On a GAAP basis, the transaction is expected to be 28 cents dilutive in fiscal 2008 and 22 cents dilutive in 2009 to TD's earnings, and 10 cents dilutive in 2008 and flat in 2009 on an adjusted basis. The deal is expected to close in March or April 2008 subject to approvals from Commerce shareholders and US and Canadian regulatory authorities.
Commerce Bancorp has determined to take certain actions with respect to its balance sheet, with the intention of reducing the exposure to changes in interest rates. The Company intends to sell a portion of its fixed-rate investment securities portfolio and reinvest in short term or floating rate AAA-rated securities. Commerce presently anticipates that it will record an after-tax charge of approximately US$150 million in the third quarter related to these actions. In addition, Commerce has agreed to negotiate the sale of Commerce Banc Insurance Services, Inc. (CBIS) to George E. Norcross, III, Chairman and Chief Executive Officer of Commerce Banc Insurance Services, Inc. (CBIS) and a director of the Commerce Board, subject to the approval of TD Bank Financial Group.
Mr. DiFlorio and Bob Falese, President and Chief Executive Officer, Commerce Bank will continue to be responsible for running Commerce, based at its headquarters in Cherry Hill, New Jersey and will report to Bharat Masrani, President and Chief Executive Officer, TD Banknorth upon the conclusion of the transaction.
Accelerating TD Banknorth's growth strategy
"Commerce gives us scale in the Mid-Atlantic and will allow us to turbocharge our organic growth strategy," said Masrani. "We look forward to creating the first truly integrated, North American financial services powerhouse."
Advisors
TD Securities Inc., J.P. Morgan Securities Inc. and Keefe, Bruyette & Woods, Inc. are serving as financial advisors and Simpson Thacher & Bartlett LLP is serving as legal advisor to TD Bank Financial Group. Goldman, Sachs & Co. is serving as financial advisor and Sullivan & Cromwell LLP is serving as legal advisor to Commerce Bancorp Inc.
Commerce Bank Key Facts & Figures
- As "America's Most Convenient Bank," Commerce Bank offers personal and commercial banking, insurance, investment planning and wealth management services.
- The Bank's "have it your way" approach emphasizes Commerce's hallmark products and services including seven-day branch banking, free personal chequing, online banking and stock trading at commerceonline.com, and 1-800-YES-2000, a full-service, 24-hour bank-by-phone system.
- In a market of highly critical customers, Commerce Bank ranks highest in satisfying banking customers in the New York City metropolitan area, according to the J.D. Power and Associates 2006 Retail Banking Satisfaction Study.
The operations of Commerce Bank include:
- Nearly 460 locations and close to 700 Automated Teller Machines (ATMs) throughout New Jersey, New York, Connecticut, Pennsylvania, Delaware, Washington, DC, Virginia, Maryland and Southeast Florida
- 2.4 million customers
- US $100 million in average deposits per branch
- US $48 billion in assets as of June 30, 2007
- US $44 billion in deposits as of June 30, 2007
- More than 15,000 employees
TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group. The Bank serves more than 14 million customers in four key businesses operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust as well as the Bank's global insurance operations (excluding the U.S.); Wealth Management, including TD Waterhouse Canada, TD Waterhouse U.K. and the Bank's investment in TD Ameritrade; U.S. Personal and Commercial Banking through TD Banknorth; and Wholesale Banking, including TD Securities. The Bank also ranks among the world's leading on-line financial services firms, with more than 4.5 million on-line customers. The Bank had $404 billion in assets as at July 31, 2007. The Bank is headquartered in Toronto, Canada. The Bank's common stock is listed on the Toronto Stock Exchange and the New York Stock Exchange under symbol: TD, as well as on the Tokyo Stock Exchange.
Commerce Bancorp Inc.
Commerce Bank, "America's Most Convenient Bank," is a leading retailer of financial services with almost 460 convenient stores in Metropolitan New York, Metropolitan Philadelphia, Metropolitan DC and Southeast Florida. Headquartered in Cherry Hill, New Jersey, Commerce Bancorp (NYSE: CBH) has approximately $49 billion in assets. For more information about Commerce, please visit the company's interactive financial resource center at www.commerceonline.com.
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