Dive Brief:
- TD Bank will buy Wall Street brokerage firm Cowen in a $1.3 billion all-cash deal expected to close in the first quarter of 2023, the Canadian lender announced Tuesday.
- TD sold 28.4 million nonvoting common shares of its Charles Schwab stock for approximately $1.9 billion to provide capital for the transaction.
- Upon completion of the deal, 1,700 Cowen employees will join TD Securities, the Canadian lender said. Cowen CEO Jeffrey Solomon will also join the senior leadership of TD Securities, reporting to Riaz Ahmed, TD Securities’ CEO and the bank’s chief of wholesale banking, TD said.
Dive Insight:
TD had been rumored to be in discussions to buy Cowen for the past month.
Bharat Masrani, TD’s CEO, has been transparent in his ambition to grow the Canadian lender southward. The bank announced in February it would acquire Memphis, Tennessee-based First Horizon Bank in a deal valued at $13.4 billion. That transaction, like Tuesday’s, is also on track to close in 2023’s first quarter, according to Bloomberg.
Masrani told the wire service in March 2021 that TD is “very open” to major mergers and acquisitions in the U.S. market. TD reportedly was among the banks considering buying Bank of the West from BNP Paribas late last year. But another Canadian lender — BMO — swooped in and agreed to acquire it for $16.3 billion.
In a statement Tuesday, Masrani called Cowen a "leading independent dealer with a premier U.S. equities business and a strong, diversified investment bank that, when combined with TD Securities, will allow us to accelerate our strategic U.S. growth plans.”
"Most importantly, the acquisition will provide new capabilities and increased depth in key business lines to meet our clients' needs and will allow us to leverage our combined expertise, talent and integrated offerings across a much larger client base," Masrani added.
The $1.3 billion Cowen deal value translates to $39 per share. The acquisition reduces TD's ownership interest in Charles Schwab from approximately 13.4% to 12.0%, the bank said, adding that it doesn’t plan to divest additional shares in that company.
To leverage the strength of Cowen's brand, parts of the combined business will be known as TD Cowen, a division of TD Securities, led by Solomon, TD said in its press release.
“Taking this step will make us even stronger and more effective in serving [our clients’] growing needs,” Solomon said. “The strategic decisions and focused investments that we have made over the last few years have positioned Cowen for this exciting new chapter of our growth.”
TD’s First Horizon tie-up, meanwhile, has garnered pushback from Sen. Elizabeth Warren, D-MA, who in June urged the Office of the Comptroller of the Currency (OCC) to block the deal, citing a Capitol Forum report that claimed the bank instituted a point system that pressured employees to open sham accounts.
