First Horizon shares fall 50% after TD Bank merger collapses

New York (CNN) First Horizon and TD Bank have called off a $13 billion deal that would have created America’s sixth-largest bank, adding to the turmoil sweeping the nation’s regional lenders.

Caught up in the worst banking crisis since 2008, First Horizon’s (MFA) The stock price has fallen about 40% in the past couple of months, falling well below the $25 per share that TD offered when the takeover was announced in February 2022.

The stock closed at $15.05 a share on Wednesday and plunged another 40% in morning trading Thursday after the deal was mutually abandoned by the banks.

First Horizon is a regional lender in the southeastern United States and would have helped Canada’s TD expand south of the border. But regional banks have lost the confidence of investors and customers since the collapse of Silicon Valley Bank and Signature Bank in March.

On Monday, a third regional bank, First Republic, failed, and JPMorgan bought most of its assets. A fourth, PacWest Bank, confirmed earlier Thursday that it is looking for a financial lifeline.

First Horizon said it remains stable, cash-rich and diversified.

“While today’s announcement is unfortunate and unexpected, First Horizon will continue on its growth trajectory and operate from a position of strength and stability,” First Horizon CEO Bryan Jordan said in a statement.

TD said in a statement that the companies called off the merger due to an unexpectedly long regulatory approval process. Without a timetable for approval, the companies began to question whether the deal would even get the regulators’ blessing. TD said the regulatory issue was for “reasons unrelated to First Horizon.”

While TD did not directly cite the banking crisis or First Horizon’s crumbling market value as the reason for abandoning the purchase, CEO Bharat Masrani said in a statement that the decision provided “clarity” to customers and shareholders.

TD will pay First Horizon a breakup fee of $200 million plus $25 million in reimbursement fees.

Other regional bank stocks have fallen in recent days following First Republic’s failure. Investors are waiting for the next shoe to drop. Early Thursday, California-based PacWest Bank said it was exploring “all strategic options” after its share price was cut in half in after-hours trading following a Bloomberg report that it was considering a sale.

PacWest’s (PACW) the share was almost halved on Thursday, while Western Alliance Bank (WAL)another regional competitor, fell by more than 20%.

As the Fed has raised interest rates to fight inflation, the value of regional lenders’ loans and bond holdings has crumbled. Customers had moved their money to larger banks, leaving some regional banks without the cash they need to pay for withdrawals.

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