TD Bank acquiring Commerce Bancorp

This story was published on Oct. 03, 2007 on Page A5 in all editions of the Bangor Daily News

MOUNT LAUREL, N.J. – Canada’s second-largest bank is bidding to bulk up its south-of-the-border presence by buying New Jersey-based Commerce Bancorp for $8.5 billion in cash and stock.

The deal announced Tuesday would nearly double TD Bank Financial Group’s U.S. presence, adding Commerce’s roughly 460 branches on the East Coast.

TD Bank, with a market capitalization of $52.2 billion, is Canada’s second-largest bank. Forbes’ Canada 40 list from 2005 named it the nation’s fourth-largest company overall. It already owns Portland, Maine-based TD Banknorth, with about 600 branches in the United States, most of them in New England but some as far south as the Philadelphia area.

“Commerce Bank is a perfect fit,” TD Bank President Ed Clark told analysts on a conference call Tuesday.

He said the acquisition would make the company a major player in U.S. banking, ranking seventh largest in terms of number of branches.

It also would become the second-largest bank in both Philadelphia and New Jersey, expand its business in New York and get a beachhead in Washington and Florida.

For Commerce investors, the news did not seem universally rosy, though.

“The clients that I’m speaking to think you’re giving away the franchise,” Gary Townsend, a banking analyst with Friedman, Billings, Ramsey Group, told Commerce officials in a conference call.

Commerce officials said TD Bank’s offer was the best one they received.

Mark Fitzgibbon, who follows the industry for Sandler O’Neill + Partners, wrote in his evaluation that the price was low because some logical buyers for Commerce could not offer such a large deal. He added that a July consent order with the Office of the Comptroller of the Currency makes new branch approvals more cumbersome for the bank.

“We suspect the reason that the deal price was a bit lower than we predicted was because Commerce was negotiating from a position of weakness,” he wrote.

Cherry Hill-based Commerce Bancorp shares fell 16 cents to $39.45 in afternoon trading Tuesday after earlier rising to a 52-week high of $41. Shares in TD Bank declined $4.16, or 5.4 percent, to $72.78.

Toronto-Dominion Bank broke into the United States in 2004 when it bought control of New England’s Banknorth.

TD Bank also owns about 1,000 TD Canada Trust banks in Canada, and has a stake in the broker TD Ameritrade, based in Omaha. It also owns TD Waterhouse Canada and TD Waterhouse U.K.

TD Bank had about $404 billion in assets as of July 31. Commerce had about $48 billion in assets as of June 30.

Terms call for a 75 percent stock and 25 percent cash transaction that values Commerce at $42 per share, a 7 percent premium over the stock’s Monday closing price.

The banks said the deal would close in the spring of 2008 if regulators approve.