The Globe and Mail, Tara Perkins, 14 November 2007
Toronto-Dominion Bank says it remains comfortable with the $8.5-billion (U.S.) price tag on its blockbuster bid for New Jersey's Commerce Bancorp Inc., despite documents that show Commerce's investment bankers approached 17 potential bidders but only TD was willing to make an offer at a premium to the stock price.
"We made our bid proposal on numbers we were comfortable with, and for economic reasons we were comfortable with," TD spokesman Neil Parmenter said Wednesday.
The deal for Commerce's nearly 460 locations, which will make TD the seventh-biggest bank in North America, became possible after Commerce fell into trouble this year.
Commerce's board of directors began considering a sale after the bank revealed it was being investigated by regulators and its chief executive officer resigned, according to documents filed this week with the U.S. Securities and Exchange Commission.
Not only had regulators hampered its ability to open branches quickly, the bank's board was also contending with numerous business challenges, ranging from a relatively low return on assets to increased competition from bigger banks to a slowdown in deposit growth on a branch-by-branch basis, the documents state.
"Although Commerce's board of directors believed that each of the business challenges, as well as the regulatory issues, could have been resolved, such resolutions would have required substantial investments of money and personnel and would have diverted management's attention from day-to-day operation of the business for a lengthy period of time," the proxy circular filed in connection with deal states.
In July, the board gave Commerce's investment bankers at Goldman Sachs a mandate to find potential strategic partners. They had initial conversations with 17 banks and identified four, including TD, that Goldman Sachs considered most likely to make a bid at a premium to Commerce's stock price. (A number of the 13 banks that were whittled out had either said they didn't think their business models were compatible with Commerce or that they would not be willing to pay a premium).
Between Aug. 6 and Aug. 10, Goldman Sachs met with each of the four contenders, and gave them a chance to ask questions after asking them to sign confidentiality agreements. On Aug. 7, Bharat Masrani, the chief executive of TD Banknorth — TD's U.S. bank — and some of his colleagues met with the investment bankers, and suggested that Commerce's customer-service philosophy meshed with TD's and that Commerce could become a key part of TD's U.S. strategy.
With the Commerce acquisition, roughly half of TD's 2,100 branches will be in the U.S.
Following that round of meetings, one potential bidder told Goldman Sachs it had concluded Commerce was not a good fit with its current strategy. Another said it had decided not to expand its operations in the mid-Atlantic region.
TD and the other remaining contender submitted preliminary written expressions of interest. TD's said it would be willing to make a cash and share offer at a premium to Commerce's stock price, subject to due diligence. The other bank said it would be willing to make an offer roughly equivalent to the stock price.
Commerce's board "noted that the price range in TD's preliminary indication of interest was materially greater than that indicated by the other institution," the documents state. Goldman Sachs said the other contender was not willing to raise its offer.
"The board of directors also discussed with Goldman Sachs the fact that, notwithstanding the widespread speculation that Commerce would be sold, no other potential purchasers had approached Commerce about a potential business combination," the documents said.
From that point forward, Commerce focused its efforts on its one remaining suitor, and TD spent Aug. 29 to Sept. 20 on due diligence, pouring through business, legal, tax, and regulatory issues.
The banks had multiple discussions about the potential losses in Commerce's portfolio as a result of sharp declines that had been occurring in bond markets. By Sept. 26, TD told Commerce it would be willing to make an offer for $42US per share, subject to it being satisfied that Commerce would take acceptable actions to reduce the potential interest rate risk in its investment securities portfolio.
The following days saw negotiations on subjects ranging from a break fee ($332-million U.S.) to new contracts for some Commerce executives.
TD's final offer — roughly one-quarter cash, three-quarters stock — was announced on Oct. 2, at which point it was valued at $42.34 based on the bank's share price. That was a premium of about 25 per cent above Commerce's stock price on June 28, the day before its CEO resigned. Commerce shares closed at $39.47 on Oct. 2, down 27 cents.
The deal's price tag is what TD was willing to pay for a new expansion avenue outside of Canada's limited banking borders, as well as for bragging rights. "We are the first North American bank," chief executive officer Ed Clark declared.
Toronto-Dominion Bank says it remains comfortable with the $8.5-billion (U.S.) price tag on its blockbuster bid for New Jersey's Commerce Bancorp Inc., despite documents that show Commerce's investment bankers approached 17 potential bidders but only TD was willing to make an offer at a premium to the stock price.
"We made our bid proposal on numbers we were comfortable with, and for economic reasons we were comfortable with," TD spokesman Neil Parmenter said Wednesday.
The deal for Commerce's nearly 460 locations, which will make TD the seventh-biggest bank in North America, became possible after Commerce fell into trouble this year.
Commerce's board of directors began considering a sale after the bank revealed it was being investigated by regulators and its chief executive officer resigned, according to documents filed this week with the U.S. Securities and Exchange Commission.
Not only had regulators hampered its ability to open branches quickly, the bank's board was also contending with numerous business challenges, ranging from a relatively low return on assets to increased competition from bigger banks to a slowdown in deposit growth on a branch-by-branch basis, the documents state.
"Although Commerce's board of directors believed that each of the business challenges, as well as the regulatory issues, could have been resolved, such resolutions would have required substantial investments of money and personnel and would have diverted management's attention from day-to-day operation of the business for a lengthy period of time," the proxy circular filed in connection with deal states.
In July, the board gave Commerce's investment bankers at Goldman Sachs a mandate to find potential strategic partners. They had initial conversations with 17 banks and identified four, including TD, that Goldman Sachs considered most likely to make a bid at a premium to Commerce's stock price. (A number of the 13 banks that were whittled out had either said they didn't think their business models were compatible with Commerce or that they would not be willing to pay a premium).
Between Aug. 6 and Aug. 10, Goldman Sachs met with each of the four contenders, and gave them a chance to ask questions after asking them to sign confidentiality agreements. On Aug. 7, Bharat Masrani, the chief executive of TD Banknorth — TD's U.S. bank — and some of his colleagues met with the investment bankers, and suggested that Commerce's customer-service philosophy meshed with TD's and that Commerce could become a key part of TD's U.S. strategy.
With the Commerce acquisition, roughly half of TD's 2,100 branches will be in the U.S.
Following that round of meetings, one potential bidder told Goldman Sachs it had concluded Commerce was not a good fit with its current strategy. Another said it had decided not to expand its operations in the mid-Atlantic region.
TD and the other remaining contender submitted preliminary written expressions of interest. TD's said it would be willing to make a cash and share offer at a premium to Commerce's stock price, subject to due diligence. The other bank said it would be willing to make an offer roughly equivalent to the stock price.
Commerce's board "noted that the price range in TD's preliminary indication of interest was materially greater than that indicated by the other institution," the documents state. Goldman Sachs said the other contender was not willing to raise its offer.
"The board of directors also discussed with Goldman Sachs the fact that, notwithstanding the widespread speculation that Commerce would be sold, no other potential purchasers had approached Commerce about a potential business combination," the documents said.
From that point forward, Commerce focused its efforts on its one remaining suitor, and TD spent Aug. 29 to Sept. 20 on due diligence, pouring through business, legal, tax, and regulatory issues.
The banks had multiple discussions about the potential losses in Commerce's portfolio as a result of sharp declines that had been occurring in bond markets. By Sept. 26, TD told Commerce it would be willing to make an offer for $42US per share, subject to it being satisfied that Commerce would take acceptable actions to reduce the potential interest rate risk in its investment securities portfolio.
The following days saw negotiations on subjects ranging from a break fee ($332-million U.S.) to new contracts for some Commerce executives.
TD's final offer — roughly one-quarter cash, three-quarters stock — was announced on Oct. 2, at which point it was valued at $42.34 based on the bank's share price. That was a premium of about 25 per cent above Commerce's stock price on June 28, the day before its CEO resigned. Commerce shares closed at $39.47 on Oct. 2, down 27 cents.
The deal's price tag is what TD was willing to pay for a new expansion avenue outside of Canada's limited banking borders, as well as for bragging rights. "We are the first North American bank," chief executive officer Ed Clark declared.
__________________________________________________________
The Associated Press, Geoff Mulvihill, 13 November 2007
Some Commerce Bancorp executives will get big paydays — some more than $7.5-million (U.S.) — if the company's sale to TD Bank Financial Group goes through and they stick around.
That's in addition to what they would make as shareholders in the company.
Cherry Hill-based Commerce, which decided to sell after founder Vernon W. Hill II was forced out earlier this year as part of a settlement with regulators, disclosed the payment schedule in a filing Tuesday with the federal Securities and Exchange Commission.
Seven executives would get four annual payments as a result of a change in control. They would have to remain with TD Bank for three years after the sale to get the full amounts, which range between $1.75-million and $7.63-million.
The executives in line to get the most are Dennis DiFlorio, the chairman of Commerce Bank, who would get $7.63-million; Robert Falese, president and CEO of Commerce Bank, would get $7.33-million; and George E. Norcross III, the chairman and CEO of Commerce Banc Insurance Services, would get $7.59-million.
Each man's stocks and outstanding options are worth millions more.
Tuesday's filings also explained how Mr. Norcross, who is best known in New Jersey as a major player in Democratic politics, can buy the insurance division, which is a successor of a company that he founded.
He can negotiate until Dec. 1 to buy the company. If he doesn't reach a deal, he can leave the company at any time and get a payment for involuntarily termination without cause. The company has not disclosed how much that would be now, but as of Dec. 31, 2006, the amount would have been about $2.2-million, according to previous filings. He would also get a similar payment if he bought the insurance subsidiary.
Also, if he does not buy the company but leaves Commerce and starts a new insurance firm, there's a provision that would relax noncompete restrictions for former employees who went to work for him.
In June, Commerce announced that Mr. Hill would leave the company as part of a settlement with the Office of the Comptroller of the Currency over self-dealing. The bank has a long history of giving contracts to firms controlled by Mr. Hill and his relatives.
The company quickly went up for sale. Only Toronto-based TD Bank Financial Group was willing to pay a premium over Commerce's stock value at the time, according to Tuesday's filing. The deal is expected to close in April.
Since the sale was announced, the company has had some more woes.
It lost money in the third fiscal quarter and announced that the SEC was investigating the same type of issues that the OCC found troublesome.
And Monday, there were reports that the company was warning some customers that an employee had released their personal information to a third party, causing the potential for identity theft. Commerce has offered those customers 12 free months of credit monitoring.
The bank has not explained which customers, or how many, are at risk.
In trading on the NYSE on Tuesday, Commerce shares were selling at $37.46, up 64 cents.
;
Some Commerce Bancorp executives will get big paydays — some more than $7.5-million (U.S.) — if the company's sale to TD Bank Financial Group goes through and they stick around.
That's in addition to what they would make as shareholders in the company.
Cherry Hill-based Commerce, which decided to sell after founder Vernon W. Hill II was forced out earlier this year as part of a settlement with regulators, disclosed the payment schedule in a filing Tuesday with the federal Securities and Exchange Commission.
Seven executives would get four annual payments as a result of a change in control. They would have to remain with TD Bank for three years after the sale to get the full amounts, which range between $1.75-million and $7.63-million.
The executives in line to get the most are Dennis DiFlorio, the chairman of Commerce Bank, who would get $7.63-million; Robert Falese, president and CEO of Commerce Bank, would get $7.33-million; and George E. Norcross III, the chairman and CEO of Commerce Banc Insurance Services, would get $7.59-million.
Each man's stocks and outstanding options are worth millions more.
Tuesday's filings also explained how Mr. Norcross, who is best known in New Jersey as a major player in Democratic politics, can buy the insurance division, which is a successor of a company that he founded.
He can negotiate until Dec. 1 to buy the company. If he doesn't reach a deal, he can leave the company at any time and get a payment for involuntarily termination without cause. The company has not disclosed how much that would be now, but as of Dec. 31, 2006, the amount would have been about $2.2-million, according to previous filings. He would also get a similar payment if he bought the insurance subsidiary.
Also, if he does not buy the company but leaves Commerce and starts a new insurance firm, there's a provision that would relax noncompete restrictions for former employees who went to work for him.
In June, Commerce announced that Mr. Hill would leave the company as part of a settlement with the Office of the Comptroller of the Currency over self-dealing. The bank has a long history of giving contracts to firms controlled by Mr. Hill and his relatives.
The company quickly went up for sale. Only Toronto-based TD Bank Financial Group was willing to pay a premium over Commerce's stock value at the time, according to Tuesday's filing. The deal is expected to close in April.
Since the sale was announced, the company has had some more woes.
It lost money in the third fiscal quarter and announced that the SEC was investigating the same type of issues that the OCC found troublesome.
And Monday, there were reports that the company was warning some customers that an employee had released their personal information to a third party, causing the potential for identity theft. Commerce has offered those customers 12 free months of credit monitoring.
The bank has not explained which customers, or how many, are at risk.
In trading on the NYSE on Tuesday, Commerce shares were selling at $37.46, up 64 cents.
