TD Bank (NYSE:TD) announced on Tuesday that it has reached an agreement to acquire Cowen (NASDAQ:COWN), a New York-based financial services company, in an all-cash deal valued at US$1.3 billion.
Cowen’s investment bank and complementary products and services will help TD Bank accelerate its growth strategy in the US.
The Toronto-based bank will exchange 39 US dollars for each share of common stock in Cowen (NASDAQ:COWN). On a fully synergized run rate basis, the deal is anticipated to deliver an adjusted return on invested capital of around 14% and be “modestly accretive” to TD’s 2023 adjusted EPS.
By the third year, TD Bank anticipates achieving revenue synergies of $300M to $350M USD. Additionally, it anticipates three-year pretax costs of about US$450M for integration and retention.
Bharat Masrani, president and executive officer of TD Bank Group (NYSE:TD), explained that Cowen was attractive to his business because it is both a prominent independent dealer with a premier US equity business and a robust, diversified investment bank that, when joined with TD Securities, will help TD Bank accelerate its strategic U.S. expansion objectives.
TD (NYSE:TD) has sold 28.4 million non-voting common shares of Charles Schwab (NYSE:SCHW) for about $1.9 billion to assist in financing the transaction, reducing TD’s stake in Schwab from 13.4 percent to 12.0 percent.
The purchase price equates to an 8.1x multiple of Cowen’s 2023 earnings and a 1.7x multiple of Cowen’s tangible book value as of March 31, 2022 (NASDAQ:COWN).
In pre-market activity on Tuesday, Cowen (NASDAQ:COWN) shares were up 7.1 percent to $38.00, while TD Bank (NYSE:TD) shares were down 0.7 percent.
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