Toronto-Dominion Bank agreed to buy US brokerage Cowen Inc. for $1.3 billion in cash, bulking up its presence in American capital markets just months after striking a historic deal to expand its retail operations in the country.

Toronto-Dominion agreed to pay $39 a share, according to a statement Tuesday. The acquisition is likely to be “modestly accretive” to adjusted earnings per share next year, the Toronto-based company said. Bloomberg News reported last month that the bank was weighing the deal.

In purchasing Cowen, Canada’s second-largest bank is addressing its relative weakness in the capital-markets business relative to larger competitors such as Royal Bank of Canada and helping cushion the company from potential downturns in its retail-banking operations. The deal also further deepens Toronto-Dominion’s reach into the US, along with its planned $13.4 billion acquisition of First Horizon Corp., announced in February.

“The acquisition of Cowen will add key capabilities to our growing global-markets platform in US equities sales and trading, and in US equity research,” Toronto-Dominion Chief Executive Officer Bharat Masrani said on a conference call with analysts. “This acquisition will further accelerate our growth in the US and position TD Securities as a North American dealer with global reach and a full suite of cross-border capabilities.”

Toronto-Dominion’s wholesale-banking business accounted for about 11% of the company’s fiscal 2021 revenue. That compares with the roughly 21% that Royal Bank generated from its capital-markets division.

Cowen, which went public in 2006, saw its net income soar 38% year-over-year to $289 million in 2020 amid a record year for initial public offerings. In the past 12 months, it has acted as a bookrunner on 55 IPOs, serving as the lead adviser on five of the listings, according to data compiled by Bloomberg.

The brokerage’s shares surged 7.6% to $38.20 at 9:51 a.m. in New York. Toronto-Dominion slipped 0.7% to C$82.58.

With mergers in Canada’s highly concentrated banking sector blocked by regulators, Toronto-Dominion has long looked south for expansion. The firm entered US retail banking with the $3.8 billion purchase of 51% of Banknorth Group Inc. in 2004. Three years later, Toronto-Dominion doubled its US presence with the $8.34 billion acquisition of Commerce Bancorp Inc.  

Toronto-Dominion had more than 1,100 US branches at the end of its most recent fiscal year, and it stands to gain about 400 more when its purchase of First Horizon is completed. That deal would expand Toronto-Dominion beyond its East Coast footprint into markets such as Tennessee, Louisiana and Texas.

With the Cowen acquisition, TD Securities will add the New York-based firm’s 1,700 employees, bringing the total to 6,500 people in 40 cities worldwide. The deal has been approved by the boards of both companies and is expected to be completed in the first quarter of next year.

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