Canada lender to buy U.S. bank

Toronto-Dominion Bank, in what would be the biggest foreign takeover by a Canadian lender, agreed Tuesday to pay $8.5 billion for Commerce Bancorp Inc., the New Jersey company that ousted founder Vernon Hill three months ago.

Shareholders of Cherry Hill-based Commerce, the state’s largest bank, would get about $42.37 a share in cash and stock, or 6.6% more than Monday’s closing price, Toronto-Dominion said.

The 62% surge in the Canadian dollar since 2002 has increased Toronto-Dominion’s market value to more than $52 billion, making foreign acquisitions cheaper for Canada’s third-biggest bank. Commerce decided to sell after replacing Hill, its former chief executive whose dealings with companies controlled by family members prompted a U.S. investigation.

Toronto-Dominion “is striking while the iron is hot, with the Canadian dollar at parity,” said Gavin Graham, who helps oversee about $5.3 billion as chief investment officer at Guardian Group of Funds in Toronto.

“TD is making itself into a powerhouse in the northeastern United States,” Graham said.

The Toronto-based bank already owns Portland, Maine-based TD Banknorth and Hudson United Bancorp in Mahwah, N.J. With the purchase of Commerce, Toronto-Dominion would double its U.S. business, adding almost 460 outlets and $48 billion in assets across nine states.

Toronto-Dominion’s acquisition would be the third-largest foreign transaction for a Canadian company, trailing Manulife Financial Corp.’s purchase of John Hancock Financial Services in 2003 and the takeover of Reuters Group by Thomson Corp. this year, according to data compiled by Bloomberg.

Canadian banks this year have announced or completed about $18 billion in acquisitions of banks in the U.S., Latin America and the Caribbean, taking advantage of the soaring dollar. The Canadian dollar reached equal value with the U.S. currency last month for the first time since 1976.

Toronto-Dominion’s U.S.-traded shares declined $4.29, or 5.6%, to $72.65, while Commerce shares fell 14 cents to $39.47.