Transformative transaction to deliver
significant value to TD
- TD to have ownership stake in a wealth industry leader with the
size, scale and capabilities to drive continued growth
- TD has entered into a revised and extended Insured Deposit
Account (IDA) agreement that will offer attractive economics for
both TD and Schwab
- Transaction builds on TD's long and successful history in the
direct investing space
TORONTO, Nov. 25, 2019 /CNW/ - TD Bank Group ("TD" or "the
Bank") today announced its support for the acquisition of TD
Ameritrade Holding Corporation ("TD Ameritrade"), of which the Bank
is a major shareholder, by The Charles Schwab Corporation
("Schwab"), through a definitive agreement announced by those
companies earlier this morning.
Under the terms of the transaction, all TD Ameritrade
shareholders, including TD, would exchange each TD Ameritrade share
they own for 1.0837 shares of Schwab, which represents a 17 per
cent premium over the volume weighted-average price exchange ratio
over the 30 trading days ending November
20, 2019. As a result, TD will exchange its approximate
43 per cent ownership in TD Ameritrade for a 13.4 per cent stake in
Schwab, consisting of up to 9.9 per cent voting common shares and
the remainder in non-voting common shares, convertible upon
transfer to a third party.
"This transaction will deliver significant value for TD and
provide us with an ownership stake in one of the most innovative
and highly regarded investment firms in the U.S.," said Bharat
Masrani, Group President and Chief Executive Officer, TD. "The
combination of Schwab's leading investment services capabilities
with TD Ameritrade's best-in-class direct investing platform will
create an industry leader with a more diversified revenue base and
even stronger growth profile. We are pleased to support this
transaction and look forward to our new relationship with
Schwab."
New Stockholders' Agreement
TD and Schwab have entered
into a new Stockholders' Agreement that will become effective upon
closing, under which TD will have two seats on Schwab's Board of
Directors. Under the agreement, TD will be subject to customary
standstill and lockup restrictions.
Revised and Extended IDA
TD and Schwab have also
entered into a revised IDA agreement that will become effective
upon closing, and that will continue to provide TD with a
profitable earnings stream. Starting on July
1, 2021, IDA deposits, which were US$103 billion as at July
31, 2019, can be reduced at Schwab's option by up to
US$10 billion a year, with a floor of
US$50 billion. The term of the
revised IDA agreement extends to 2031. The servicing fee under the
revised IDA agreement will be set at 15 bps upon closing.
Financial Impact
This transaction adds significant
value to TD's investment and TD expects to record a sizeable
revaluation gain at closing.
As Schwab realizes anticipated significant synergies and growth
from the transaction, TD expects its share of Schwab's earnings to
increase proportionately, more than offsetting the impact of the
lower revenues under the revised long-term IDA agreement. Overall
the effect on TD's earnings per share is expected to be modestly
accretive once integration is complete. Upon closing, we also
expect the transaction to have minimal capital impact to TD.
Closing Conditions
The transaction is subject to
certain closing conditions, including majority approval by the
shareholders of each of TD Ameritrade and Schwab, and majority
approval of TD Ameritrade's shareholders other than TD and certain
other shareholders of TD Ameritrade that have entered into voting
agreements. In addition, the transaction is subject to
receipt of regulatory approvals. TD has agreed to vote its TD
Ameritrade shares in favour of the transaction. The transaction is
expected to close in the second half of calendar 2020, subject to
all applicable closing conditions having been satisfied.
TD Securities and J.P. Morgan served as financial advisors and
Simpson Thacher & Bartlett LLP served as legal advisor to
TD.
Caution Regarding Forward-Looking Information
From
time to time, the Bank (as defined in this document) makes written
and/or oral forward-looking statements, including in this document,
in other filings with Canadian regulators or the United States (U.S.) Securities and
Exchange Commission (SEC), and in other communications. In
addition, representatives of the Bank may make forward-looking
statements orally to analysts, investors, the media, and others.
All such statements are made pursuant to the "safe harbour"
provisions of, and are intended to be forward-looking statements
under, applicable Canadian and U.S. securities legislation,
including the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements include, but are not limited to,
statements made in this document, the Management's Discussion and
Analysis ("2018 MD&A") in the Bank's 2018 Annual Report under
the heading "Economic Summary and Outlook", for the Canadian
Retail, U.S. Retail, and Wholesale Banking segments under headings
"Business Outlook and Focus for 2019", and for the Corporate
segment, "Focus for 2019", and in other statements regarding the
Bank's objectives and priorities for 2019 and beyond and strategies
to achieve them, the regulatory environment in which the Bank
operates, and the Bank's anticipated financial performance.
Forward-looking statements are typically identified by words such
as "will", "would", "should", "believe", "expect", "anticipate",
"intend", "estimate", "plan", "goal", "target", "may", and
"could".
By their very nature, these forward-looking statements require
the Bank to make assumptions and are subject to inherent risks and
uncertainties, general and specific. Especially in light of the
uncertainty related to the physical, financial, economic,
political, and regulatory environments, such risks and
uncertainties – many of which are beyond the Bank's control and the
effects of which can be difficult to predict – may cause actual
results to differ materially from the expectations expressed in the
forward-looking statements. Risk factors that could cause,
individually or in the aggregate, such differences include: credit,
market (including equity, commodity, foreign exchange, interest
rate, and credit spreads), liquidity, operational (including
technology and infrastructure), reputational, insurance, strategic,
regulatory, legal, environmental, capital adequacy, and other
risks. Examples of such risk factors include the general business
and economic conditions in the regions in which the Bank operates;
the ability of the Bank to execute on key priorities, including the
successful completion of acquisitions and dispositions, business
retention plans, and strategic plans and to attract, develop, and
retain key executives; disruptions in or attacks (including
cyber-attacks) on the Bank's information technology, internet,
network access or other voice or data communications systems or
services; the evolution of various types of fraud or other criminal
behaviour to which the Bank is exposed; the failure of third
parties to comply with their obligations to the Bank or its
affiliates, including relating to the care and control of
information; the impact of new and changes to, or application of,
current laws and regulations, including without limitation tax
laws, capital guidelines and liquidity regulatory guidance, and the
bank recapitalization "bail-in" regime; exposure related to
significant litigation and regulatory matters; increased
competition, including through internet and mobile banking and
non-traditional competitors; changes to the Bank's credit ratings;
changes in currency and interest rates (including the possibility
of negative interest rates); increased funding costs and market
volatility due to market illiquidity and competition for funding;
critical accounting estimates and changes to accounting standards,
policies, and methods used by the Bank; existing and potential
international debt crises; and the occurrence of natural and
unnatural catastrophic events and claims resulting from such
events.
The acquisition of TD Ameritrade by Schwab is subject to
majority approval by the shareholders of each of TD Ameritrade and
Schwab, and majority approval of TD Ameritrade's shareholders other
than TD and certain other shareholders of TD Ameritrade that have
entered into voting agreements, regulatory approvals, and certain
other conditions. There is no assurance that the acquisition
will be completed as described in this document or at all, or that
the Stockholders Agreement and IDA will become effective.
There can be no assurance that the Bank will realize the
anticipated benefits or results; actual results could differ
materially from the expectations expressed in the forward-looking
statements. Examples of material assumptions made by the Bank in
the forward-looking statements, including the Bank's expectations
regarding the costs and financial impact of the transaction,
include assumptions regarding Schwab's future net income,
transaction costs, transaction process and timeline, expected
synergies, future Bank capitalization, tax rate, currency
conversion rate, and financial results, based on the Bank's
experience.
The Bank cautions that the preceding list is not exhaustive of
all possible risk factors and other factors could also adversely
affect the Bank's results. For more detailed information, please
refer to the "Risk Factors and Management" section of the 2018
MD&A, as may be updated in subsequently filed quarterly reports
to shareholders and news releases (as applicable) related to any
events or transactions discussed under the headings "Significant
Events" and "Significant and Subsequent Events in 2019" in the
relevant MD&A, which applicable releases may be found on
www.td.com. All such factors should be considered carefully, as
well as other uncertainties and potential events, and the inherent
uncertainty of forward-looking statements, when making decisions
with respect to the Bank and the Bank cautions readers not to place
undue reliance on the Bank's forward-looking statements.
Material economic assumptions underlying the forward-looking
statements contained in this document are set out in the 2018
MD&A under the headings "Economic Summary and Outlook", for the
Canadian Retail, U.S. Retail, and Wholesale Banking segments,
"Business Outlook and Focus for 2019", and for the Corporate
segment, "Focus for 2019", each as may be updated in subsequently
filed quarterly reports to shareholders.
Any forward-looking statements contained in this document
represent the views of management only as of the date hereof and
are presented for the purpose of assisting the Bank's shareholders
and analysts in understanding the Bank's financial position,
objectives and priorities and anticipated financial performance as
at and for the periods ended on the dates presented, and may not be
appropriate for other purposes. The Bank does not undertake to
update any forward-looking statements, whether written or oral,
that may be made from time to time by or on its behalf, except as
required under applicable securities legislation.
Investor Call Details:
The call will be audio webcast
live at https://edge.media-server.com/mmc/p/kyhdeusf at
10:00 a.m. ET and is expected to last
approximately 60 minutes. The call will feature presentations by TD
executives on the transaction and will be followed by a
question-and-answer period with analysts. The presentation material
referenced during the call will be available on the website at
https://www.td.com/investor-relations/ir-homepage/presentations-and-events/upcoming-events/calendar.jsp.
A listen-only telephone line will be available at 416-641-6150 or
1-866-696-5894 (toll free). The participant passcode is
2727354#.
About TD Bank Group:
The Toronto-Dominion Bank and its
subsidiaries are collectively known as TD Bank Group ("TD" or the
"Bank"). TD is the fifth largest bank in North America by branches and serves over 26
million customers in three key businesses operating in a number of
locations in financial centres around the globe: Canadian Retail,
including TD Canada Trust, TD Auto Finance Canada, TD Wealth
(Canada), TD Direct Investing, and
TD Insurance; U.S. Retail, including TD Bank, America's Most
Convenient Bank®, TD Auto Finance U.S., TD Wealth
(U.S.), and an investment in TD Ameritrade; and Wholesale Banking,
including TD Securities. TD also ranks among the world's
leading online financial services firms, with more than 13 million
active online and mobile customers. TD had CDN$1.4 trillion in assets on July 31, 2019. The Toronto-Dominion Bank trades
under the symbol "TD" on the Toronto and New York Stock Exchanges.
SOURCE TD Bank Group