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TD Bank to acquire Epoch Holding in $668 M deal

Rob Gillies, Associated Press

TORONTO (AP) -- TD Bank Group plans to buy Epoch Holding Corp. in a $668 million cash deal that will give the Canadian bank a U.S. asset manager to help its North American wealth business.

Colleen Johnston, chief financial officer for TD Bank, said the deal accelerates TD's growth strategy in its U.S. wealth management business. TD Bank has been expanding aggressively in retail banking in the U.S. in recent years.

TD Bank said Thursday it will pay $28 for each share of Epoch, which represents a premium of about 28 percent to Epoch's Wednesday closing price of $21.91. The company's stock price has climbed as high as $27.87 in the past year, but shares were down slightly so far in 2013, as of Wednesday's close.

Epoch shares climbed more than 26 percent, or $5.85, to $27.76 on Thursday.

Epoch will continue to operate under its current brand name and operating structure. Epoch's board of directors has unanimously recommended that the New York company's shareholders approve the deal. The companies expect it to close in the first half of next year.

"We talked openly about having an interest in acquiring an asset manager in the U.S. and this is just a perfect fit for us," Johnston said in a telephone interview.

Johnston said TD has had fantastic double digit growth in Canada for years, but they've long said that can't continue forever and noted that Canada has been slowing.

"You need to diversify that growth and that's why the United States made perfect sense us," Johnston said. "At the moment we would expect our U.S. growth rate next year to beat our Canadian growth rate and I think that's what our investors signed up for when we started expanding in the United States."

Canadian banks are investing in the U.S. from a position of strength, as they weathered the economic crisis far better than their counterparts in other countries. In a concentrated banking system dominated by five major players, Canadian banks have been looking across the border to find growth opportunities.

Toronto-Dominion Bank purchased New Jersey-based Commerce Bancorp in 2007 in what has been its largest acquisition. TD also bought smaller, troubled banks in the Carolinas and Florida such as South Carolina-based South Financial Group. TD also agreed to buy the risky assets of three insolvent Florida banks worth $3.8 billion. TD didn't have a presence in U.S. eight years ago, but now has more than 1,300 branches in the U.S. compared to about 1,100 in Canada.

TD also holds a 45 percent stake in Omaha, Nebraska-based online brokerage TD Ameritrade Holding Corp.

TD also reported fourth quarter earnings on Thursday that beat analyst estimates. Its profit for the three months ended Oct. 31 amounted to $1.66 per share before adjustments, down two cents per share from the same time last year. On an adjusted basis, TD had $1.83 per share of diluted earnings — up from $1.75 per share a year earlier and two cents a share above a consensus estimate.

Shares of TD fell two percent, or $1.65, to $81.57 in morning trading on the New York Stock Exchange on Thursday.