Toronto-Dominion Bank (NYSE:TD) (TSE:TD) called off its $13.4 billion acquisition of First Horizon Corp. (NYSE:FHN) last week. Both parties mutually agreed to terminate the merger deal, citing uncertainty related to the regulatory approvals. However, a recent Wall Street Journal report highlighted that regulators’ reluctance to approve the deal was caused by TD Bank Group’s handling of suspicious customer transactions.
The report emphasized that concerns around TD’s anti-money-laundering practices, including its handling of unusual transactions and the speed at which it reported those transactions to the authorities, became the biggest hurdle.
TD agreed to acquire First Horizon for $25 a share. While the acquisition would have brought sizeable synergies for TD Bank and bolstered its competitive positioning, Canaccord Genuity analyst Scott Chan sees the termination of the deal as a positive for TD’s shareholders.
In a note to investors dated May 4, Chan said, “Overall, we view the TD/FHN deal termination as positive for TD and gets it back to a peer-leading capital position.” The analyst expects TD’s excess capital to be used for future M&A activities.
Echoing similar sentiments, Credit Suisse analyst Joo Ho Kim sees the termination of the merger agreement as a longer-term positive for TD shareholders. Kim believes that the development allows TD Bank to pursue more accretive acquisitions.
While these analysts see the deal’s failure as positive, this raises concerns about whether TD could face similar challenges for its future acquisitions in the U.S. Against this backdrop, let’s look at what the Street recommends for TD Bank stock.
Is TD a Buy or Sell?
Analysts are cautiously optimistic about TD Bank stock. It has received six Buy and four Hold recommendations for a Moderate Buy consensus rating. Moreover, these analysts’ average price target of $71.91 implies 16.89% upside potential.
