TD Securities to buy Cowen for $1.3 billion to accelerate US expansion

TD sold 28.4 million non-voting common shares in Schwab (a 1.4% stake worth $1.9 billion) to fund the acquisition of Cowen.

TD has agreed to acquire Cowen in an all-cash transaction valued at US$1.3 billion, or US$39 for each share of Cowen common stock, in a move that accelerates TD Securities’ long-term growth strategy in the United States.

TD Securities stands to gain from the addition of Cowen’s 1,700 employees and leadership team, including Jeffrey Solomon, Chair & CEO of Cowen, who will join the senior leadership of TD Securities.

Parts of the combined business will be known as TD Cowen, a division of TD Securities, in order to leverage Cowen’s brand in the United States as the investment bank enjoys a good reputation there.

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.

Bharat Masrani, Group President and CEO, TD Bank Group, said: “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. 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.”

Jeffrey Solomon, Chair & CEO of Cowen, said: “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. 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.”

Riaz Ahmed, President and CEO, TD Securities and Group Head, Wholesale Banking, TD Bank Group, commented: “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. 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’ 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 analysts.

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.

The Canada-based bank 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.

TD sold 28.4 million non-voting common shares of The Charles Schwab Corporation for proceeds of approximately US$1.9 billion in order to fund the acquisition . This reduced 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  (above 11%).