Commerce Bancorp & TD Bank $8.5 Billion Buyout Deal In Jeopardy

Implications: TD Bank (Toronto Dominion) agreed to purchase Commerce Bancorp for $8.5 billion in 2007, however, shareholder lawsuits and a suit from its former CEO and a suit filed against his wife and her design firm may be putting the deal in jeopardy. TD Bank agreed to pay a 7% premium over Commerce's closing price on 10.1.07, and the deal is expected to generate cost synergies of approximately $310 million by 2009, and scheduled to be completed by April 2008, however, with lawsuits popping up weekly, its possible that the projected cost synergies may not be realized in 2009, or at all if the deal can't get done. The deal would expand and double TD Bank's presence in the U.S. and rank TD Bank in the Top 10 largest banks in the U.S. Commerce's shareholders are suing the bank in an attempt to block the deal, Hill is suing on behalf of himself for wrongful termination and seeking $50 million and his wife and her firm for unpaid fees and the bank is suing Hill's wife over the fees.  

Analysis: Vernon Hill II, former founder and CEO of Commerce Bancorp was ousted in 2007, when Commerce's Directors asked him to resign amidst an OCC Investigation (Office of the Controller of the Currency) into real estate transactions involving Commerce Bancorp, Hill's possible insider trading, his wife and other relatives. The deal which is expected to close in April 2008, has become riddled with "tit-for-tat" lawsuits with Hill suing Commerce Bancorp for wrongful termination, shareholders suing to stop the buyout and Commerce Bancorp suing Hill's wife and her firm over the amount of fees owed to her firm for interior design work. 

1.  Perhaps Commerce's Board planned to hold its former CEO accountable for the banks downturn as a result of his alleged actions and not pay his severance package. Who knew a potential deal could get this messy when "nepotism" was at play and when Hill was canned from the bank he founded and chaired 

2.  Commerce's branch expansion plans was hampered as a result of its high exposure in the mortgage market, which was key to Commerce's profit growth and federal inquiries into its former CEO and founder Vernon Hill II, for possible insider trading

Takeaway:  Commerce Bancorp has over 400 branches in NJ, NY, PA, DE, CT, FL and DC and Commerce was growing through branch expansion in prime retail sites and opened offices throughout NY and other areas, however, after the bank came under scrutiny from federal regulators for possible insider trading by its former CEO, Vernon Hill II, the bank seemed to lose some of its former fanfare and wasn't able to bounce back after the scandal, which ultimately led to the TD Bank & Commerce deal, which may be in jeopardy and could fall through.