UPDATE 5-TD Bank expands in U.S. with $8.5 bln deal
(Adds comments. In U.S. dollars unless noted) (Eds: note unusual spelling vFinance in paragraph 16)
TORONTO, Oct 2 (Reuters) - Toronto-Dominion Bank (TD.TO) said on Tuesday it plans to buy New Jersey-based Commerce Bancorp Inc CBH.N in a friendly $8.5 billion deal that would nearly double the scale of the Canadian bank's U.S. business.
The cash and stock deal offered a 7 percent takeover premium to Commerce's closing share price on Monday, but the premium shrank as TD's stock declined on Tuesday.
Based on number of branches, the deal would create the seventh-biggest bank in North America.
"With this deal TD has achieved critical mass in the United States," TD Bank's president and chief executive, Ed Clark, said on a conference call.
Commerce, New Jersey's biggest bank, was considered vulnerable to a takeover following the departure of longtime CEO Vernon Hill in June, amid investigations into dealings with insiders.
"He was the soul and the life of the company and when he was pushed out, the life of the company was drawn out as well," said Gerard Cassidy, an analyst at RBC Capital Markets, who described the pricing of the deal as "not extraordinary".
TD Bank, Canada's second-biggest bank, is offering 75 percent stock and 25 percent cash for Commerce, which TD said worked out to $42.37 a share based on Monday's closing price.
Based on Tuesday afternoon's share price for TD, the offer amounted to about $40.53 a share, or $8.2 billion.
TD stock was down $4.44, or 5.8 percent, at $72.50 just after noon on the New York Stock Exchange, and was C$3.83 lower at C$72.50 on the Toronto Stock Exchange.
Commerce shares, which are trading ex-dividend, were down 28 cents at $39.33 on the New York Stock Exchange.
TD said it would take a one-time pretax restructuring charge of about $490 million and that the takeover would dilute its earnings in 2008 and 2009.
Clark has said for months that his bank planned to grow internally in the United States through its TD Banknorth unit in New England, but he did not rule out U.S. acquisitions.
Clark said on the call Tuesday morning that the transaction's pricing is reasonable, and that the two banks' business models were "strikingly similar."
But RBC's Cassidy said the integration risks were high for the TD-Commerce deal "due to the fact that the culture of the organization will change dramatically". Continued...
