Greenville, SC - GREENVILLE, SC (WMBF) - The South Financial Group announced Monday it has agreed to merge with TD Bank Financial Group, a move that allows TD Bank to acquire all of Carolina First Bank's deposits.
South Financial operates Carolina First Bank, which conducts banking operations in North Carolina and South Carolina.
Under the agreement, TD will acquire all outstanding shares of South Financial's common stock. Upon completion of the transaction, TD will acquire all of South Financial Group and all of its businesses and obligations, including all deposits of Carolina First Bank, which also operates as Mercantile Bank in Florida.
Under terms of the agreement, South Financial's common shareholders will receive, at each shareholder's election, $0.28 in cash or 0.004 shares of TD common stock per TSFG common share for a total of approximately $61 million in cash or TD common stock (based on TD's closing stock price on May 14, 2010).
In addition, immediately prior to completion of the merger, the U.S. Department of the Treasury will sell to TD its $347 million of TSFG preferred stock and the associated warrant acquired under the Treasury's Capital Purchase Program and discharge all accrued but unpaid dividends on that stock for total cash consideration of approximately $130.6 million. Completion of the merger requires, among other things, the approval of TSFG shareholders and customary regulatory approvals. The transaction is expected to close in TD's third fiscal quarter of 2010.
In connection with the agreement, TD and TSFG entered into a share purchase agreement under which South Financial is issuing to TD preferred stock that votes as a single class with South Financial's common stock representing 39.9 percent of its total voting power after the issuance. South Financial intends to issue the preferred stock described above in reliance on the shareholder approval exception set forth in NASDAQ Rule 5635(f), and South Financial's audit committee has approved reliance on this exception.
In light of the pending transaction with TD, South Financial is postponing its annual meeting of shareholders that was scheduled to be held on Tuesday, May 18, 2010.
"Our board and management have conducted a broad and extensive process over the last six months to seek the best outcome for our shareholders, as well as for our customers, employees and the communities which we serve," said H. Lynn Harton, president/CEO of The South Financial Group. "TD is a strongly-capitalized financial institution with a prudent approach to risk management. It is committed to maintaining TSFG's tradition of customer service and community involvement. TD's AAA-rated financial strength will help the combined company position itself for future success and long-term growth."
Harton continued, "With this merger, we will also become part of an organization with a passion for delivering legendary customer experiences and a commitment to building strong relationships with their customers. Our Carolina First and Mercantile operations will become an integral part of TD's expansion in building out the 'Maine to Florida' franchise in the United States. This is a strong combination and will bring stability to our customers and employees."
The addition of TSFG marks TD Bank's entry into the Carolinas and bolsters its Florida franchise. The franchises fit together very well, further filling out TD's U.S. footprint.
"TSFG offers us a strong platform for expansion in the U.S. Southeast, further expands our presence in Florida and demonstrates our continued commitment to growing our business," said Bharat Masrani, president/CEO, TD Bank, America's Most Convenient Bank. "We believe that we can add significant upside by applying our retail expertise and WOW! culture to this established regional bank. The transaction builds on our organic growth capability and the momentum of our recent acquisitions in the deposit-rich Florida market. It also gives us a strong position in North and South Carolina, where Carolina First is a leading community bank with a solid base for market share growth and asset generation."
TD Bank is the sixth largest bank in North America by branches and serves more than 18 million customers in a number of locations around the globe. TD had $567 billion in assets on Jan. 31, 2010.
The South Financial Group is a bank holding company focused on serving small businesses, middle market companies, and retail customers in the Carolinas and Florida. At March 31, 2010, it had approximately $12.4 billion in total assets and 176 branch offices. At March 31, 2010, approximately 44 percent of South Financial's total customer deposits were in South Carolina, 45 percent were in Florida, and 11 percent were in North Carolina.