TD Bank faces class action suit after scrapped First Horizon merger

After a merger with First Horizon Corp. was terminated earlier this month, TD Bank Group now faces a class action lawsuit alleging it made misleading statements and omissions related to the acquisition.

As NJBIZ reported, the $13.4 billion deal announced last February – which would have created the country’s sixth-largest bank – was called off in early May due to uncertainty over securing regulatory approvals for reasons unrelated to First Horizon.

The class action suit was filed by the Arbitrage Fund, a First Horizon shareholder, on behalf of all persons or entities that purchased or acquired First Horizon stock between Feb. 28, 2022, and May 3, 2023.

“On March 1, 2023, First Horizon revealed that TD Bank had informed First Horizon that it ‘does not expect that the necessary regulatory approvals will be received in time to complete the Pending TD Merger by May 27, 2023,’” according to the complaint. “On this news, the price of First Horizon shares fell 10.6% to close $22.14 per share on March 1, 2023.”

Then, on May 4 when the mutual merger termination was announced citing that regulatory uncertainty, the shareholders say First Horizon’s stock tanked further.

“On this news, First Horizon’s share price fell another $4.99 per share, or 33%, to close at $10.06 per share on May 4, 2023,” the complaint said.

Days later, reports surfaced that the inability to secure regulatory approval was due to TD Bank’s deficient anti-money-laundering practices.

“During the class period, defendants failed to disclose material adverse facts about TD Bank’s operations, the risk associate with the timing for the closing of the First Horizon acquisition, and TD Bank’s ability to obtain the necessary regulatory approvals,” the complaint alleges. “Specifically, defendants failed to the disclose that:

(1) TD Bank had deficient controls over Anti-Money Laundering (AML) and suspicion transaction reporting;
(2) that the lack of controls posed a significant risk to the closing of the First Horizon acquisition; and
(3) that the deficient AML controls actually caused delay in obtaining the regulatory approvals for the First Horizon acquisition.”

In a statement to NJBIZ, a spokesperson for TD Bank vehemently and succinctly pushed back on the lawsuit.

“TD’s public disclosures are accurate,” the spokesperson told NJBIZ. “The lawsuit is without merit and TD will vigorously defend it.”