GSA Daily Staff Report
Published May 17, 2010

The South Financial Group based in Greenville announced early today that it has entered a definitive agreement to merge with TD Bank Financial Group, headquartered in Toronto.

TD Bank has U.S. headquarters in Maine and New Jersey.

South Financial, one of the largest banks headquartered in South Carolina, will become a wholly owned subsidiary of TD Bank. TD will acquire all of South Financial, its businesses and obligations, including all deposits of Carolina First Bank and Mercantile Bank in Florida.

"Our board and management have conducted a broad and extensive process over the last six months to seek the best outcome for our shareholders, as well as for our customers, employees and the communities which we serve," said Lynn Harton, pictured, president and CEO of The South Financial Group. "TD is a strongly-capitalized financial institution with a prudent approach to risk management. It is committed to maintaining TSFG's tradition of customer service and community involvement. TD's Aaa-rated financial strength will help the combined company position itself for future success and long-term growth."

South Financial had entered into a consent order with the Federal Deposit Insurance Corp. that required it to raise capital and rid its books of troubled assets. The bank was set to ask shareholders at its annual meeting on Tuesday to authorize an additional 1 billion shares of common stock. That meeting has been postponed.

The addition of TSFG marks TD Bank's entry into the Carolinas and bolsters its Florida franchise.

"TSFG offers us a strong platform for expansion in the U.S. Southeast, further expands our presence in Florida and demonstrates our continued commitment to growing our business," said Bharat Masrani, president and CEO, TD Bank. "We believe that we can add significant upside by applying our retail expertise and WOW! culture to this established regional bank. The transaction builds on our organic growth capability and the momentum of our recent acquisitions in the deposit-rich Florida market. It also gives us a strong position in North and South Carolina, where Carolina First is a leading community bank with a solid base for market share growth and asset generation."

Harton will continue to be based in Greenville and will join TD Bank's management team, reporting to Masrani, upon the conclusion of the transaction.

Under terms of the agreement, which has been approved unanimously by the boards of both companies, TSFG's common shareholders will receive, at each shareholder's election, $0.28 in cash or 0.004 shares of TD common stock per TSFG common share for a total of approximately $61 million in cash or TD common stock. In addition, immediately prior to completion of the merger, the United States Department of the Treasury will sell to TD its $347 million of TSFG preferred stock and the associated warrant acquired under the Treasury's Capital Purchase Program and discharge all accrued but unpaid dividends on that stock for total cash consideration of approximately $130.6 million.

Completion of the merger requires, among other things, the approval of TSFG shareholders and customary regulatory approvals. The transaction is expected to close in TD's third fiscal quarter of 2010.

In connection with the agreement, TD and TSFG entered into a share purchase agreement under which TSFG is issuing to TD preferred stock that votes as a single class with TSFG's common stock representing 39.9% of TSFG's total voting power after the issuance. TSFG intends to issue the preferred stock described above in reliance on the shareholder approval exception set forth in NASDAQ Rule 5635(f), and TSFG's audit committee has approved reliance on this exception.

Morgan Stanley is serving as financial advisor, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to TSFG in this transaction. BofA Merrill Lynch and Goldman Sachs are serving as joint financial advisors, and Simpson Thacher & Bartlett LLP is serving as legal advisor to TD Bank Financial Group and TD Bank in this transaction.

The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group. It is the sixth largest bank in North America by branches and serves more than 18 million customers around the globe. The company had $567 billion in assets on Jan.31. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.