TD to buy Cowen for $1.3 billion to bulk up capital-markets unit

Toronto-Dominion Bank agreed to buy US brokerage Cowen Inc. for $1.3 billion in cash, bulking up its presence in American capital markets just months after striking a historic deal to expand its retail operations in the country.

Toronto-Dominion agreed to pay $39 a share, the Toronto-based bank said in a statement Tuesday. Bloomberg News reported last month that Toronto-Dominion was weighing the deal.

In purchasing Cowen, Canada’s second-largest bank is addressing its relative weakness in the capital-markets business relative to larger competitors such as Royal Bank of Canada and helping cushion the company from potential downturns in its retail-banking operations. The deal also further deepens Toronto-Dominion’s reach into the US, following its $13.4 billion acquisition of First Horizon Corp., announced in February.  

"Cowen is a leading independent dealer with a premier US equities business and a strong, diversified investment bank that, when combined with TD Securities, will allow us to accelerate our strategic US growth plans,” Toronto-Dominion Chief Executive Officer Bharat Masrani said in the statement.

Toronto-Dominion’s wholesale-banking business accounted for about 11% of the company’s fiscal 2021 revenue. That compares with the roughly 21% that Royal Bank generated from its capital-markets division.

Cowen, which went public in 2006, saw its net income soar 38% year-over-year to $289 million in 2020 amid a record year for initial public offerings. In the past 12 months, it has acted as a bookrunner on 55 initial public offerings, serving as the lead adviser on five of the listings, according to data compiled by Bloomberg.

With bank mergers in Canada’s highly concentrated banking sector blocked by regulators, Toronto-Dominion has long looked south for expansion. The firm entered U.S. retail banking with the $3.8 billion purchase of 51% of Banknorth Group Inc. in 2004. Three years later, Toronto-Dominion doubled its U.S. presence with the $8.34 billion acquisition of Commerce Bancorp Inc.   

Toronto-Dominion had more than 1,100 US branches at the end of its most recent fiscal year, and it stands to gain about 400 more when its purchase of First Horizon is completed. That deal would expand Toronto-Dominion beyond its East Coast footprint into markets such as Tennessee, Louisiana and Texas.