Business Context and Reporting Period
This Form 6-K filing by The Toronto-Dominion Bank (TD) dated November 20, 2006, announces a definitive merger agreement for a going-private transaction. TD Bank Financial Group (TDBFG) will acquire all outstanding shares of TD Banknorth Inc. (Banknorth) not currently owned by TDBFG. TDBFG currently owns approximately 57% of Banknorth. Upon completion, Banknorth will become a wholly-owned subsidiary of TDBFG.
Key Financial Metrics and Transaction Terms
- Offer Price: US$32.33 per share in cash.
- Aggregate Consideration: Approximately US$3.2 billion (CDN$3.6 billion).
- Premium: 6.5% over Banknorth's closing price on November 17, 2006.
- Valuation Multiples: 22 times Banknorth's GAAP earnings and 14.4 times cash operating earnings for the twelve months ended September 30, 2006.
- Banknorth Assets: $40 billion in total consolidated assets as of September 30, 2006.
- TDBFG Assets: CDN$385.8 billion as of July 31, 2006.
Material Changes and Strategic Impact
The primary material change is the transition of TD Banknorth from a majority-owned subsidiary to a wholly-owned subsidiary. This transaction consolidates TDBFG's U.S. banking operations. The filing notes that TDBFG has secured voting agreements with large stockholders holding or having discretion over 26.2 million shares, representing a significant portion of the remaining public float.
Guidance, Outlook, and Risks
Financial Outlook
Based on I/B/E/S estimates, TDBFG projects the following earnings per share (EPS) accretion:
- GAAP Basis: CDN$0.02 per share for six months in 2007; CDN$0.12 per share in 2008.
- Adjusted Basis (excluding intangible amortization): CDN$0.05 per share for six months in 2007; CDN$0.16 per share in 2008.
Timeline and Conditions
The transaction is expected to close in March or April 2007. It is subject to:
- Approval by a majority of Banknorth's outstanding common stock and a majority of shares not held by TDBFG or affiliates.
- Approval by the Massachusetts Board of Bank Incorporation.
Risks and Contingencies
Forward-looking statements are subject to risks including changes in economic conditions, financial market performance, interest rates, regulatory changes in the U.S. and Canada, acts of terrorism, and war or political instability. The filing explicitly states that actual results may differ materially from anticipated results.
Investor Verification Checklist
- Verify the final vote count at the special meeting of TD Banknorth stockholders.
- Confirm receipt of approval from the Massachusetts Board of Bank Incorporation.
- Review the upcoming proxy statement and Schedule 13E-3 transaction statement for detailed financial data and participant interests.
- Monitor the closing date to ensure it aligns with the projected March or April 2007 timeline.
- Assess the impact of the transaction on TDBFG's capital structure and liquidity post-closing.