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Toronto-Dominion Bank to Expand in the U.S. with Cowen Buyout

Story Highlights

In a bid to expand its U.S. footprint, Toronto-Dominion Bank has announced its plans to acquire a U.S. brokerage firm. The move is expected to boost its investment banking business, TD Securities.

Ending all market speculations, Toronto-Dominion Bank (TSE: TD) (NYSE: TD) has finally announced that it will buy Cowen Inc. (COWN), a U.S.-based financial services company, for $1.3 billion or $39 for each share of Cowen common stock. The transaction is expected to conclude in the first quarter of fiscal 2023. 

Shares of the Canadian bank rose 1.4% on August 1, as investors were expecting this announcement, following a report by The Wall Street Journal. Shares of Cowen, too, jumped 9% to $38.70 in Monday’s extended trading session.

The Toronto-based bank majorly operates through its Canadian Retail, U.S. Retail Bank, and Wholesale Banking segments.

New York-based Cowen provides alternative investment management, investment banking, equity and credit research, prime brokerage, sales, and trading services.

The acquisition is expected to broaden Toronto-Dominion Bank’s presence in the United States and boost its investment banking business, TD securities. The move seems to be strategically sound as the U.S. Investment Banking & Securities Dealing market, valuing around $182.5 billion, is expected to grow around 17.6% in 2022, according to an IBISWorld report.

After the successful completion of the transaction, Jeffrey Solomon, the Chair & CEO of Cowen, will join the senior leadership team of TD Securities. He will report to Riaz Ahmed, who is the President and CEO of TD Securities and the Group Head of Wholesale Banking at TD Bank Group.

Moreover, certain parts of the combined venture will be known as TD Cowen, which will become a division of TD Securities and fall under the leadership of Solomon.

Other Developments

Meanwhile, the Totonto-based bank has decreased its stake in The Charles Schwab Corporation to 12% from approximately 13.4% by selling 28.4 million shares of non-voting common stock of Schwab.

In February 2022, TD entered into a definitive agreement to acquire First Horizon in an all-cash deal valued at $13.4 billion. Subject to customary closing conditions, the deal is expected to close in the first quarter of fiscal 2023. The buyout is expected to expand TD’s presence in the new markets of Louisiana, Tennessee, Texas, and Georgia.

TD Stock Carries a Hold Consensus Rating

Overall, the Street has a Hold consensus rating on the stock, which is based on one Buy, 10 Holds, and one Sell. TD’s average price forecast of C$99.90 signals that the stock may surge nearly 20.1% from current levels. Shares of the company have declined 13.8% so far this year.

TipRanks data shows that financial bloggers are 100% Bullish on TD, compared to the sector average of 67%. Meanwhile, hedge funds are Very Negative about the stock, as they sold 125,500 TD shares over the last quarter.

Is TD Stock Worth Your Time & Money?

The Cowen deal is expected to strengthen the investment banking unit of TD and expand its presence in the highly lucrative U.S. Investment Banking & Securities Dealing market. Further, this leading financial services provider has already been witnessing strong revenue growth across its businesses. Considering the strong underlying fundamentals of the bank, investors can consider this stock to enjoy handsome returns in the long term.

Read full Disclosure.

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