Acquisition will create an integrated North
American dealer, significantly accelerating TD Securities' U.S.
growth strategy
TORONTO and NEW
YORK, Aug. 2, 2022 /PRNewswire/ - TD Bank Group
("TD") (TSX: TD) and (NYSE: TD) and Cowen Inc. ("Cowen") (NASDAQ:
COWN) today announced a definitive agreement for TD to acquire
Cowen in an all-cash transaction valued at US$1.3 billion, or US$39 for each share of Cowen common stock.
Through this transaction, TD Securities will accelerate its
long-term growth strategy in the United
States by acquiring a high-quality and rapidly growing
investment bank with outstanding talent and highly complementary
products and services.
"Cowen is a leading independent dealer with a premier U.S.
equities business and a strong, diversified investment bank that,
when combined with TD Securities, will allow us to accelerate our
strategic U.S. growth plans," said Bharat Masrani, Group President
and CEO, TD Bank Group. "Most importantly, the acquisition will
provide new capabilities and increased depth in key business lines
to meet our clients' needs and will allow us to leverage our
combined expertise, talent, and integrated offerings across a much
larger client base."
With this acquisition, TD Securities will benefit from the
addition of Cowen's 1,700 talented colleagues and its exceptional
leadership team. Once the transaction closes, Jeffrey Solomon, Chair & CEO of Cowen, will
join the senior leadership of TD Securities, reporting to
Riaz Ahmed, President and CEO, TD
Securities and Group Head, Wholesale Banking, TD Bank Group. To
leverage the strength of Cowen's brand, post-closing, parts of the
combined business will be known as TD Cowen, a division of TD
Securities, and will be headed by Mr. Solomon.
"At Cowen our success comes from striving to outperform in all
we do by exceeding expectations and providing innovative solutions
to, and partnering with, our clients. Taking this step will make us
even stronger and more effective in serving their growing needs,"
said Mr. Solomon. "The strategic decisions and focused investments
that we have made over the last few years have positioned Cowen for
this exciting next chapter of our growth. I look forward to having
our exceptional talent and valued clients join the TD family. We
plan to do great things together because we are aligned with our
cultural values of vision, empathy, sustainability, and tenacious
teamwork."
"Together, we will have more than 6,500 professionals in 40
cities across the globe, extending our reach into new industry
coverage areas and building even deeper, long-term client
relationships," added Mr. Ahmed. "I look forward to welcoming Jeff
and his team to TD Securities and to the fantastic opportunities
for growth we will create together."
TD Securities and Cowen – A
Leading Full-Service Investment Bank
The combined firms' pro-forma global revenues will increase by
more than a third to approximately C$6.8
billion1 with added advisory, capital markets,
equity execution and industry-leading research capabilities and
broadened expertise in key growth sectors. Following the closing of
the transaction, TD Securities' existing depth and breadth in
global market research capabilities will benefit from Cowen's
complementary and highly diverse equity research franchise, which
is positioned among the top 10 research platforms in the U.S. by
both stocks under coverage and number of publishing
analysts2 and includes considerable expertise in
Environmental, Social and Governance research. Furthermore, TD
Securities' balance sheet and capital markets expertise are
expected to bring immediate benefits to Cowen's existing client
base.
Transaction Highlights
The transaction is expected to be modestly accretive to TD's
2023E adjusted EPS on a fully-synergized basis3 and
generate approximately 14% adjusted return on invested capital on a
fully-synergized run rate basis.4 The purchase price
represents a 1.7 times multiple of Cowen's tangible book value as
of March 31, 2022 and a 8.1 times
multiple of Cowen's 2023E earnings.5 TD expects to
achieve US$300-350 million in revenue
synergies by year three. TD expects to incur total pre-tax
integration and retention costs of approximately US$450 million over three years.
The transaction, which has been approved by the boards of
directors of TD and Cowen, is expected to close in the first
calendar quarter of 2023, and is subject to customary closing
conditions, including approvals from Cowen's stockholders and
certain U.S., Canadian, and foreign regulatory authorities,
including the Office of the Superintendent of Financial
Institutions (OSFI), the Financial Industry Regulatory Authority
(FINRA), and under the Hart-Scott-Rodino (HSR) Act.
To provide the capital required for the transaction, TD has sold
28.4 million non-voting common shares6 of The Charles
Schwab Corporation ("Schwab") for proceeds of approximately
US$1.9 billion, reducing TD's
ownership interest from approximately 13.4% to 12.0%. When combined
with this share sale, the acquisition of Cowen is expected to be
neutral to TD's Common Equity Tier 1 ratio which is expected to be
comfortably above 11% at closing, pro forma for the closing of TD's
acquisition of First Horizon Corporation.7
TD's strategy with respect to its investment in Schwab has not
changed and it has no current intention to divest additional
shares.
Advisors
Perella Weinberg Partners LP served as financial advisor, and
Simpson Thacher & Bartlett LLP and Torys LLP served as legal
advisors to TD. Ardea Partners and Perkins Advisors LLC served as
financial advisors, and Cravath, Swaine & Moore LLP served as
legal advisor to Cowen.
Conference call and supplemental
information
TD will host a conference call on August
2, 2022 at 8:30 a.m. ET.
Presentation materials will be available on the TD website at
www.td.com/investor in advance of the call. A listen-only
telephone line will be available at 416-641-6150 or 1-866-696-5894
(toll free) and the passcode is 2727354#.
The audio webcast will be archived at www.td.com/investor.
Replay of the teleconference will be available from 5:00 p.m. ET on August 2,
2022, until 11:59 p.m. ET on
August 17, 2022 by calling
905-694-9451 or 1-800-408-3053 (toll free) and the passcode is
8313844#.
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
assets and serves more than 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 The Charles Schwab Corporation; and
Wholesale Banking, including TD Securities. TD also ranks among the
world's leading online financial services firms, with more than 15
million active online and mobile customers. TD had CDN$1.8 trillion in assets on April 30, 2022. The Toronto-Dominion Bank trades
under the symbol "TD" on the Toronto and New York Stock Exchanges.
About Cowen
Inc.
Cowen Inc. ("Cowen") is a diversified financial services firm
that provides investment banking, research, sales and trading,
prime brokerage, outsourced trading, global clearing, and
commission management services. Cowen also has an investment
management division which offers actively managed alternative
investment products. Founded in 1918, Cowen is headquartered in
New York and has offices
worldwide.
Caution Regarding Forward-Looking
Information
This communication contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") and applicable Canadian
securities legislation, with respect to Cowen Inc. ("Cowen") and
The Toronto-Dominion Bank's ("TD Bank") beliefs, plans, goals,
expectations, and estimates. Forward-looking statements are not a
representation of historical information, but instead pertain to
future operations, strategies, financial results or other
developments. The words "believe," "expect," "anticipate,"
"intend," "target," "plan," "estimate," "should," "likely," "will,"
"going forward," and other expressions that indicate future events
and trends identify forward-looking statements.
Forward-looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant
business, operational, economic and competitive uncertainties and
contingencies, many of which are beyond the control of Cowen and TD
Bank, and many of which, with respect to future business decisions
and actions, are subject to change and which could cause actual
results to differ materially from those contemplated or implied by
forward-looking statements or historical performance. Examples of
uncertainties and contingencies include factors previously
disclosed in Cowen's and TD Bank's respective reports filed with
the U.S. Securities and Exchange Commission (the "SEC"), and TD
Bank's other filings with Canadian regulators, as well as the
following factors, among others: the occurrence of any event,
change or other circumstances that could give rise to the right of
one or both of the parties to terminate the definitive merger
agreement between Cowen and TD Bank; the outcome of any legal
proceedings that may be instituted against Cowen or TD Bank,
including potential litigation that may be instituted against Cowen
or its directors or officers related to the proposed transaction or
the definitive merger agreement between Cowen and TD Bank to the
proposed transaction; the timing and completion of the transaction,
including the possibility that the proposed transaction will not
close when expected or at all because required regulatory,
shareholder or other approvals are not received or other conditions
to the closing are not satisfied on a timely basis or at all, or
are obtained subject to conditions that are not anticipated;
interloper risk; the risk that any announcements relating to the
proposed combination could have adverse effects on the market price
of the common stock of either or both parties to the combination;
the possibility that the anticipated benefits of the transaction
will not be realized when expected or at all, including as a result
of the impact of, or problems arising from, the integration of the
two companies, or as a result of economic and competitive factors
in the areas where Cowen and TD Bank do business; certain
restrictions during the pendency of the merger that may impact the
parties' ability to pursue certain business opportunities or
strategic transactions; the possibility that the transaction may be
more expensive to complete than anticipated, including as a result
of unexpected factors or events; diversion of management's
attention from ongoing business operations and opportunities;
failing to retain key talent of Cowen after the announcement or
completion of the transaction; reputational risk and potential
adverse reactions or changes to business or employee relationships,
including those resulting from the announcement or completion of
the transaction; Cowen and TD Bank success in executing their
respective business plans and strategies and managing the risks
involved; currency and interest rate fluctuations; success of
hedging activities; material adverse changes in economic and
industry conditions, including the availability of short and
long-term financing; general competitive, economic, political and
market conditions, including difficult market conditions, market
disruptions and volatility; the inability to sustain revenue and
earnings growth; inflation; the impact, extent and timing of
technological changes; capital management activities; the Office of
the Superintendent of Financial Institution's and other regulators'
legislative and regulatory actions and reforms; the pandemic
created by the outbreak of COVID-19 and its variants, and resulting
effects on economic conditions, restrictions imposed by public
health authorities or governments, fiscal and monetary policy
responses by governments and financial institutions, and
disruptions to global supply chains; and other factors that may
affect future results of Cowen and TD Bank.
Assumptions about Cowen and TD Bank's current and expected
financial performance (including balance sheet, income statement
and regulatory capital figures), expected capital availability for
the proposed transaction, expected closing date of the proposed
transaction, expected synergies (and timing to achieve),
integration and restructuring costs, assumed purchase price
accounting (including fair value marks), costs of financing,
foreign exchange rates, and future regulatory capital requirements,
including the Office of the Superintendent of Financial
Institutions' announced Basel III reforms effective in the second
quarter of fiscal 2023, were considered by TD Bank in estimating
its expected return on invested capital, adjusted EPS accretion
and/or TD Bank's expected regulatory capital ratios. Examples of
material assumptions made by TD Bank in the forward-looking
statements, including TD Bank's expectations regarding the costs
and financial impact of the transaction, include assumptions
regarding Cowen's future net income, transaction costs,
transaction process, timeline to close and/or integrate the
acquisition, expected synergies, expected value of certain lines of
business in the event of a divestiture, future TD Bank
capitalization, tax rate, currency conversion rate, and financial
results. Assumptions about TD Bank's integration plan, the
efficiency and duration of integration and the alignment of
organizational responsibilities were material factors TD Bank
considered in estimating integration costs.
We caution that the foregoing list of important factors that may
affect future results is not exhaustive. Additional factors that
could cause results to differ materially from those contemplated by
forward-looking statements can be found in Cowen's Annual
Report on Form 10-K for the year ended December 31, 2021, and in its subsequent
Quarterly Reports on Form 10-Q filed with the SEC and available in
the "Investor Relations" section of Cowen's website, under
the heading "SEC Filings" and in other documents Cowen files with
the SEC, and in TD Bank's Annual Report on Form 40-F for the year
ended October 31, 2021 filed with the
SEC and available in the "Investor Relations" section of TD Bank's
website, www.td.com, under the heading "Regulatory Filings" and in
other documents TD Bank files with the SEC (available at
www.sec.gov) and applicable securities regulators in Canada (available at www.sedar.com). All such
factors, as well as other uncertainties and potential events, and
the inherent uncertainty of forward-looking statements, should be
considered carefully when making decisions with respect to Cowen
and TD Bank.
Any forward-looking statements contained in this document
represent the views of Cowen and TD Bank only as of the date hereof
and are presented for the purpose of assisting their respective
shareholders and analysts in understanding the terms of the
transaction and Cowen's and TD Bank's objectives and assumptions
and may not be appropriate for other purposes. Neither Cowen nor TD
Bank undertakes 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.
Important Other
Information
In connection with the proposed transaction, Cowen intends to
file relevant materials with the SEC, including a proxy statement
on Schedule 14A.
This communication does not constitute an offer to sell or a
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. SHAREHOLDERS OF COWEN ARE URGED TO READ, WHEN
AVAILABLE, ALL RELEVANT DOCUMENTS (INCLUDING ANY AMENDMENTS OR
SUPPLEMENTS THERETO) FILED WITH THE SEC, INCLUDING COWEN'S PROXY
STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
Cowen AND THE PROPOSED TRANSACTION.
Investors and shareholders of Cowen will be able to obtain a
free copy of the proxy statement as well as other relevant
documents filed with the SEC without charge at the SEC's website
(http://www.sec.gov). Copies of the proxy statement and the filings
with the SEC that will be incorporated by reference in the proxy
statement can also be obtained, without charge, by directing a
request to Owen Littman at
Owen.Littman@cowen.com.
Participants in the
Solicitation
TD Bank and Cowen and certain of its directors, executive
officers and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction
under the rules of the SEC. Information regarding Cowen's directors
and executive officers is available in the proxy statement for its
2021 annual meeting of shareholders, which was filed with the SEC
on May 17, 2022, and certain of its
Current Reports on Form 8-K. Other information regarding the
participants in the solicitation of proxies in respect of the
proposed transaction and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the proxy statement and other relevant materials to be filed with
the SEC. Free copies of these documents, when available, may be
obtained as described in the preceding paragraph.
1 TD
Securities twelve-month period ended April 30, 2022; Cowen
twelve-month period ended March 31, 2022, using an exchange rate of
US$1.00 = C$1.28; Cowen figure only includes Economic Proceeds for
the Investment Banking and Brokerage segments. Economic Proceeds is
a non-GAAP financial measure used by Cowen. Please see Cowen's 2021
Annual Report and Q1 2022 Earnings Release for a reconciliation of
reported results to adjusted results. Non-GAAP financial measures
and ratios used in this press release are not defined terms under
IFRS (for TD Bank) or under U.S. GAAP (for Cowen) and, therefore,
may not be comparable to similar terms used by other
issuers.
|
2 Top 10 in
the U.S. in stocks under coverage (excluding Keefe, Bruyette &
Woods Inc. from Stifel's stock count) and number of publishing
analysts, based on Starmine as of December 2, 2021.
|
3 Calculated
on the basis of the median analyst consensus estimate of Cowen's
Economic Income (US$102 million and US$156 million, for 2022E and
2023E, respectively) as of August 1, 2022 and assumes expected
synergies are fully realized and reflects the expected impact of
the sale of Schwab shares based on the median analyst consensus
estimate of Schwab's adjusted EPS (US$3.92 per share and US$4.83
per share, for 2022E and 2023E, respectively). Consensus estimates
are calendarized for TD fiscal year ending October 31, 2023.
Adjusted EPS is a non-GAAP financial measure. Economic Income is a
non-GAAP financial measure used by Cowen.
|
4 Calculated
on the basis of the median analyst consensus estimate of Cowen's
Economic Income (US$156 million for 2023E) and assumes expected
synergies are fully realized.
|
5 Cowen's
2023E earnings based on the median analyst consensus estimate of
Cowen's Economic Income of US$156 million for the fiscal year
ending December 31, 2023.
|
6 Non-voting
common shares automatically convert into shares of Schwab voting
common stock upon transfer to a third party.
|
7 Based on
TD's and Cowen's estimated balance sheets including transaction
related impacts.
|
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SOURCE TD Investor Relations