Just a day after confirming it was in takeover talks, Toronto-Dominion Bank Financial Group said Tuesday it will acquire boutique brokerage Newcrest Capital Inc. for $224-million in cash and stock.
Under the agreement, TD will cover about 75 per cent of the purchase price by issuing stock to Newcrest investors, while the remainder will be covered in cash.
Word of a union between the two has been circulating for days, following a Globe and Mail story on the deal Saturday. The two sides confirmed they were in talks on Monday.
The deal is seen as bolstering TD's investment banking operations outside the media and telecom sectors, where it is the country's biggest lender. Toronto-based Newcrest, an independent brokerage launched in 1995, offers services for institutional, corporate and government clients out of offices in Toronto, Montreal, Vancouver and Calgary.
TD said Tuesday the acquisition combines Newcrest's strengths as a leading investment banking and institutional equities firm, with the global scope of TD Securities, the bank's wholesale operation.
The two sides also said they will begin working together in their investment banking and institutional equities operations immediately, while they await regulatory and federal approval for the deal. Under the plan, the new combined unit will operate under the name TD Newcrest.
Full integration, they said, will take place once the deal has been approved. Staffing requirements will be worked out over the next few weeks.
TD said it expects the acquisition to be immediately accretive to earnings. Good will of about $160-million will be amortized over 10 years. It also said it expects the deal to enhance revenue and cut expenses.
"TD Securities gains tremendous strength in investment banking and institutional equities with this deal," Donald Wright, chairman and chief executive of TD Securities, said in a statement.
"Acquiring Newcrest's capabilities further enhances our platform in those areas and supplements our recognized and impressive strengths in [mergers and acquisitions] corporate banking, debt capital markets, derivatives, merchant banking and foreign exchange."
Robert Dorrance, Newcrest's current chief executive, will head up the institutional equities group resulting from the acquisition. He will also join TD Securities' senior management as a vice chairman.
"We are very pleased to be joining forces with TD Securities," Mr. Dorrance said. "Combining our people, our expertise and our entrepreneurial approach as a boutique dealer with the existing integrated financial, advisory and distribution clout of TD is bound to be a winning combination."
TD's acquisition represents the latest in a series of global bank and brokerage takeovers. In recent months, Chase Manhattan Corp. and J.P. Morgan & Co. Inc. have joined forces, as have Switzerland's UBS and Paine Webber Group Inc., along with Credit Suisse First Boston and Jennrette Inc.
At home, Royal Bank paid $1.5-billion (U.S.) to buy U.S. brokerage Dain Rauscher Corp., and Vancouver-based Goepel McDermid Inc. was bought out by Raymond James Financial.