By James T. Hammond
Published September 28, 2010
The South Financial Group President and CEO Lynn Harton could not repress a grin today, after shareholders approved without debate the merger of the holding company of Carolina First bank with Toronto-based TD Bank.
“One clear thing on day one is that our staff and our customers will be part of one of just two triple-A rated banks in the United States,” Harton said. “They were interested in this bank because it fits so well with their growth strategy.”
Harton said the merged bank expects no branch closures because there is no overlap between the merging banks; the territory served by TSFG is completely new territory for TD Bank, currently among the 15 largest banks in the United States and among the top 10 in North America.
And, Harton said, as the new director of regional commercial banking South for TD Bank, he’ll pick up additional duties supervising existing TD Bank operations in Maryland, the District of Columbia, and Florida.
“Clearly, this is a regional headquarters,” Harton said.
Asked if that might mean some actual growth in TD Bank operations in the Upstate, Harton smiled broadly, and cautioned that he didn’t want to get too far ahead of developments yet.
‘”There will be some announcements in the next few weeks relative to that,” he said. “Assuming the right incentives from the state, there is the possibility of new support operations.”
The TSFG shareholders’ vote cleared the way for an official closing on the merger, expected to take place late Thursday, said company Secretary William Crawford.
TSFG still owns the sprawling corporate campus on Interstate 85 that was commenced before Harton became CEO and which remains mostly unused. There are eight floors combined in the two main office buildings, and Carolina First banking operations occupy two of those floors.
Future for I-85 campus?
Harton’s comments suggested that the new owner, TD Bank, might be considering using the unused space, despite the fact the building has been for sale for more than a year.
“We are focused on having that asset utilized, whether by us or someone else,” Harton said. “We continue to evaluate use of that campus.”
Harton clearly sees the merger as the best possible outcome for the failing bank. He took the job two years ago amid a crisis on the board of directors over the group’s leadership, and the company’s plunging fortunes tied to staggering losses in real estate loans.
He has preserved the banking franchise, albeit as part of a larger institution; preserved the Greenville operations as a working, and perhaps growing, regional headquarters of the large international TD Bank; and he says that corporate executives have promised that the bank’s contribution to Upstate South Carolina’s civic life will be no less than that provided over the years by Carolina First bank.
“I could not express enough what a quality institution TD Bank is,” Harton said. “They have taken a very long-term view in bringing us into the family. Clearly they are growth-oriented.”
The shareholders of TSFG had seen the value of their stock fall dramatically in recent years; they’re to get 28 cents per share for stock that in 2005 traded above $30 a share.
Several shareholders filed suit in June, saying South Financial and its board of directors ignored a fiduciary responsibility to shareholders, who would receive 28 cents per share under the current merger agreement. Plaintiffs also said proxy documents filed with the Securities and Exchange Commission failed to disclose adequate information on the merger, among other complaints.
TD Bank settled with the shareholders, agreeing to buy no more shares in the market; and provided some additional disclosure in filings with the SEC.
South Financial maintained that the merger was the best outcome for the bank and its shareholders. And when the single item on the agenda at today’s meeting came up for discussion, there was none, nor any dissenting voice votes.
TD Bank saw the opportunity to purchase the TSFG’s large commercial banking footprint in three states as a worthwhile investment in growth despite the additional future losses the Southeast banking group was projecting in the years ahead.
TD Bank Financial Group announced in May that it agreed to purchase South Financial for about $195 million and expected to cover about $1 billion in future losses on the South Financial portfolio.
Under the agreement, South Financial shareholders would receive $61 million in cash or TD common stock. Additionally, TD would pay $130.6 million to the United States Department of the Treasury for the $347 million in preferred shares the government acquired as part of the TARP program.
Yes