Item 8.01 Other Events
As previously disclosed, on February 27, 2022, First Horizon Corporation, a
Tennessee corporation ("First Horizon"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") by and among First Horizon, The Toronto-Dominion
Bank, a Canadian chartered bank ("TD"), TD Bank US Holding Company, a Delaware
corporation and indirect, wholly owned subsidiary of TD ("TD US Holding
Company"), and Falcon Holdings Acquisition Co., a Delaware corporation and
direct, wholly owned subsidiary of TD US Holding Company ("TD Merger Sub"). The
Merger Agreement provides that, upon the terms and subject to the conditions set
forth therein, (i) First Horizon and TD Merger Sub will merge (the "Merger"),
with First Horizon continuing as the surviving entity in the merger, and (ii)
following the effective time of the Merger (the "Effective Time"), (x) at the
election of TD, TD US Holding Company and First Horizon may merge (the "Second
Step Merger"), with TD US Holding Company continuing as the surviving entity in
the merger. Following the completion of the Merger, at a time determined by TD,
First Horizon Bank, a Tennessee state-chartered bank and wholly owned subsidiary
of First Horizon ("First Horizon Bank"), and (y) TD Bank, National Association,
a national banking association and wholly owned subsidiary of TD US Holding
Company ("TD Bank") will merge (the "Bank Merger", and together with the Merger
and the Second Step Merger, the "Mergers"), with TD Bank continuing as the
surviving bank in the merger. In connection with the Merger Agreement, a
definitive proxy statement (the "definitive proxy statement") was filed with the
Securities and Exchange Commission (the "SEC") by First Horizon on April 22,
2022, which First Horizon first mailed to its shareholders (the "First Horizon
shareholders") on April 22, 2022.
In connection with the Mergers, as of May 18, 2022, seven (7) complaints were
filed in the United States District Court for the Southern District of New York,
two (2) complaints were filed in the United States District Court for the
Eastern District of New York, one (1) complaint was filed in the Chancery Court
of Shelby County, Tennessee and one (1) complaint was filed in the United States
District Court for the Eastern District of Pennsylvania by purported
stockholders of First Horizon against First Horizon and its directors: Crumpton
v. First Horizon Corp. et al., Case 1:22-cv-03212-LGS (S.D.N.Y.) (the "Crumpton
Action")? Singh v. First Horizon Corp. et al., Case 1:21-cv-09177 (E.D.N.Y.)
(the "Singh Action")? Stein v. First Horizon Corp. et al., Civil Action No.
22-cv-3341 (S.D.N.Y.) (the "Stein Action"); Wang v. First Horizon Corp. et al.,
Civil Action No. 1:22-cv-03390 (S.D.N.Y.) (the "Wang Action"); Whitfield v.
First Horizon Corp. et al., Case 1:22-cv-02399 (E.D.N.Y.) (the "Whitfield
Action"); Drulias v. D. Bryan Jordan et al., (Tenn. Ch. Ct.) (the "Drulias
Action"); Waterman v. First Horizon Corp. et al., Case 2:22-cv-01669 (E.D.Pa.)
(the "Waterman Action"); Fox v. First Horizon Corp. et al., Case 1:22-cv-03556
(S.D.N.Y.) (the "Fox Action"); Reinhardt v. First Horizon Corp. et al., Case
1:22-cv-03862 (S.D.N.Y.) (the "Reinhardt Action"); Doniger v. First Horizon
Corp. et al., Case 1:22-vc-04021 (S.D.N.Y.) (the "Doniger Action" and Berry v.
First Horizon Corp. et al., Case 1:22-cv-04031 (S.D.N.Y.) (the "Berry Action",
and together with the Crumpton Action, the Singh Action, the Stein Action, the
Wang Action, the Whitfield Action, the Drulias Action, the Waterman Action, the
Fox Action, the Reinhardt Action and the Doniger Action, the "Actions").
The complaints allege that the preliminary version of the definitive proxy
statement, filed with the SEC on April 12, 2022 (the "preliminary proxy
statement" and, together with the definitive proxy statement, the "proxy
statements"), and the definitive proxy statement were materially deficient and
therefore misleading in certain respects in violation of Sections 14(a) and
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and SEC Rule 14a-9 promulgated thereunder. Specifically, the complaints allege
that the proxy statements failed to disclose material information regarding
First Horizon's financial projections, Morgan Stanley's financial analyses,
additional information regarding prior work Morgan Stanley performed for First
Horizon and TD, and the process and events that preceded the signing of the
Merger Agreement. The complaint in the Drulias Action further alleges breaches
of fiduciary duty by First Horizon and the First Horizon directors in connection
with the negotiation of the Mergers and the disclosures in the proxy statements.
The complaints purport to seek injunctive relief, rescission, rescissory
damages, declaratory relief, monetary damages and costs, including expert and
attorneys' fees, and the filing of a proxy statement compliant with Section
14(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder.
First Horizon believes the allegations in these complaints are without merit.
While First Horizon believes that the disclosures set forth in the proxy
statements comply fully with applicable law, to moot plaintiffs' disclosure
claims and to avoid nuisance, potential expense and delay, First Horizon has
determined to voluntarily supplement the definitive proxy statement with the
below disclosures. Nothing in the below supplemental disclosure shall be deemed
an admission of the legal necessity or materiality under applicable law of any
of the disclosures set forth herein or in the definitive proxy statement. To the
contrary, First Horizon denies all allegations in the Actions that any
additional disclosure was or is required.
Supplemental Disclosures to the Definitive Proxy Statement in Connection with
the Actions
These additional disclosures (the "Supplemental Disclosures") in this Current
Report on Form 8-K supplement the disclosures contained in the definitive proxy
statement and should be read in conjunction with the disclosures contained in
the definitive proxy statement, which in turn should be read in its entirety.
Terms used in these Supplemental Disclosures, but not otherwise defined, shall
have the meanings ascribed to such terms in the definitive proxy statement. To
the extent that information in these Supplemental Disclosures differs from or
updates information contained in the definitive proxy statement, the information
in these Supplemental Disclosures shall supersede or supplement the information
in the definitive proxy statement. The information contained in these
Supplemental Disclosures speaks only as of May 18, 2022, unless these
Supplemental Disclosures specifically indicate that another date applies.
The fourth paragraph under the subsection entitled "The Mergers-Background of
the Merger" on page 43 of the definitive proxy statement is amended and
supplemented by adding the following bolded and underlined text shown below:
During the evening of January 6, 2022 and on January 7, 2022, Mr. Jordan had
individual telephonic meetings with the Executive Chairman, Lead Director and
Messrs. John Compton and Rick Maples, two independent members of the First
Horizon board. Mr. Jordan called these independent board members in part because
of their respective positions on the board of directors as Chairs of the
Nominating & Corporate Governance and Compensation Committees,
respectively.During each of these meetings, Mr. Jordan described the call he had
received on January 6, 2022 from J.P. Morgan and the proposal from TD, including
the indicative price conveyed of $25.00 per share of First Horizon common stock.
Mr. Jordan discussed with each of these directors the strategic opportunities
and alternatives available to First Horizon, including remaining independent,
and the benefits and risks associated with each alternative. During these
meetings, the directors and Mr. Jordan also discussed the current regulatory
environment and steps First Horizon might take, including due diligence and
negotiating specific deal terms, in order for First Horizon to proceed with any
such strategic opportunity.
The first full paragraph under the subsection entitled "The Mergers-Background
of the Merger" on page 45 of the definitive proxy statement is amended and
supplemented by deleting the following strikethrough text and adding the
following bolded and underlined text shown below:
On January 17, 2022, Mr. Jordan discussed TD's proposal with Mr. William
Fenstermaker, an additional independent member of the First Horizon board. Mr.
Jordan discussed the proposal with Mr. Fenstermaker in part because of his
position on the board as Chair of the Executive & Risk Committee. Mr. Jordan
provided the director Mr. Fenstermaker with an overview of TD's proposal and the
prior discussions between First Horizon and TD and their respective advisors.
Mr. Jordan and the director Mr. Fenstermaker discussed the timing required to
obtain the required regulatory approvals for the potential transaction, and
employee retention matters.
The fourth full paragraph under the subsection entitled "The Mergers-Background
of the Merger" on page 47 of the definitive proxy statement is amended and
supplemented by adding the following bolded and underlined text shown below:
To facilitate these further discussions, First Horizon and TD executed a mutual
nondisclosure agreement on February 1, 2022. The nondisclosure agreement
contained a standstill provision that will terminate with respect to a party
immediately and automatically upon the execution (and the public announcement
thereof) of an agreement by the other party with any third person or group
providing for a transaction that, if consummated, would result in any person,
directly or indirectly, (i) acquiring more than 50% of the other party's voting
securities or (ii) acquiring all or a majority of the other party's and its
subsidiaries' assets, taken as a whole.
The subsection entitled "The Mergers-Opinion of First Horizon's Financial
Advisor-First Horizon Public Trading Comparable Analysis" on page 56 the proxy
statement is amended and supplemented by adding the following bold and
underlined text and table immediately after the three bullets on the top of page
57 as shown below:
With respect to the group of selected companies, the information Morgan Stanley
presented included:
• multiple of price to estimated diluted earnings per share for 2022, or
Price / 2022E EPS;
• multiple of price to estimated diluted earnings per share for 2023, or
Price / 2023E EPS; and
• multiple of price to tangible book value per share, or Price / Tangible
Book Value.
With respect to the group of selected companies, the Price / 2022 EPS, Price /
2023 EPS and Price / Tangible Book Value multiples presented by Morgan Stanley
were the following:
Price / Price / Price /
'22E EPS '23E EPS TBV
Name (x) (x) (x)
Fifth Third Bancorp 14.0 12.3 2.1
Citizens Financial Group, Inc. 12.0 10.7 1.6
KeyCorp 11.6 10.8 1.9
Huntington Bancshares Incorporated 11.5 10.7 1.9
Regions Financial Corporation 11.8 10.8 2.2
M&T Bank Corporation 15.9 12.5 2.0
Comerica Incorporated 15.2 12.2 1.8
Zions Bancorporation, National Association 13.9 12.4 1.8
First Citizens BancShares, Inc.
10.3 8.2 1.9
Synovus Financial Corporation 12.0 10.6 1.8
The third full paragraph under the subsection entitled "The Mergers-Opinion of
First Horizon's Financial Advisor-First Horizon Public Trading Comparable
Analysis" on page 57 the proxy statement is amended and supplemented by deleting
the following strikethrough text and adding the following bolded and underlined
text shown below:
Morgan Stanley also performed a regression-based analysis based on Price /
Tangible Book Value versus 2023 cash return on tangible common equity for each
of the selected companies. The range of estimated regression-based analysis
implied values represents +/- 10% of the value implied by the regression line
equation. Utilizing a 2023 cash
return on tangible common equity estimate for First Horizon of 15.2%, as set
forth in the First Horizon Street Forecasts, the low-end range of $18.80
represents the implied value if First Horizon were valued at 90% of the value
implied by the regression line and the high-end range of $23.00 represents the
implied value if First Horizon were valued at 110% of the value implied by the
regression line. Utilizing a 2023 cashreturn on tangible common equity estimate
for First Horizon of 15.6%, as set forth in derived from the First Horizon
Financial Projections, the low-end range of $19.20 represents the implied value
if First Horizon were valued at 90% of the value implied by the regression line
and the high-end range of $23.40 represents the implied value if First Horizon
were valued at 110% of the value implied by the regression line.
The first two full paragraphs under the subsection entitled "The Mergers-Opinion
of First Horizon's Financial Advisor-First Horizon Dividend Discount Analysis"
on page 58 of the definitive proxy statement are amended and supplemented by
adding the following bolded and underlined text shown below:
Using the First Horizon Street Forecasts for 2022 and 2023 and the First Horizon
Financial Projections for 2022 and 2023 and assuming, at the direction of First
Horizon management, 5.0% annual growth thereafter and that First Horizon would
make distributions of capital in excess of the amount necessary to achieve a
9.75% common equity Tier 1 ratio level, Morgan Stanley performed a dividend
discount analysis for First Horizon on a standalone basis. The annual growth
rate was provided by the management of First Horizon and was approved for Morgan
Stanley's use by the management of First Horizon. The common equity Tier 1 ratio
level was provided by the management of First Horizon and was approved for
Morgan Stanley's use by the management of First Horizon, and represented the
midpoint of First Horizon's target common equity Tier 1 ratio level range of
9.5-10%.Morgan Stanley calculated a range of implied values per share of First
Horizon common stock based on the sum of the discounted present values of (a)
projected dividends on shares of First Horizon common stock as of December 31,
2021 through December 31, 2026 and (b) a projected terminal value of First
Horizon common stock as of December 31, 2026.
Morgan Stanley based its analysis on a range of terminal forward multiples of
11.0x to 13.0x to the terminal year 2026 estimated forward earnings, 7.8% to
9.8% discount rates, using the capital asset pricing model, and a 1.0%
opportunity cost of cash. The range of forward multiples was selected, upon the
application of Morgan Stanley's professional judgment and experience, and taking
into account, among other factors, the Price / 2022 EPS multiples for the
selected companies. The range of discount rates was selected, upon the
application of Morgan Stanley's professional judgment and experience, to reflect
First Horizon's estimated cost of equity using the capital asset pricing model.
The opportunity cost of cash was provided by the management of First Horizon and
reflected an approximate blend of securities investment yields and excess cash
and was approved for Morgan Stanley's use by the management of First Horizon.
Utilizing the range of discount rates and terminal value multiples, Morgan
Stanley derived an implied valuation range of present value indications per
share of First Horizon common stock ranging from $19.04 to $23.33 using the
First Horizon Street Forecasts and $20.02 to $24.62 using the First Horizon
Financial Projections.
The subsection entitled "The Mergers-Opinion of First Horizon's Financial
Advisor-First Horizon Analyst Price Targets Analysis" on page 58 of the
definitive proxy statement is amended and supplemented by adding the following
bolded and underlined text and table shown below:
For reference only, and not as a component of its fairness analysis, Morgan
Stanley reviewed future public market trading price targets for First Horizon
common stock prepared and published by research analysts prior to February 25,
2022, as reported by Capital IQ. These forward targets reflected each analyst's
estimate of the future public market trading price of First Horizon common
stock. The range of such analyst price targets per share for First Horizon
common stock discounted for one year back to February 25, 2022, at a rate of
8.8%, such discount rate selected by Morgan Stanley, upon the application of the
capital asset pricing model together with its professional judgment, to reflect
First Horizon's cost of equity as of February 25, 2022, in each case rounded to
the nearest $0.10, was $17.00 to $21.10 per share.
The public market trading price targets published by research analysts do not
necessarily reflect current market trading prices for First Horizon common
stock, and these estimates are subject to uncertainties, including the future
financial performance of First Horizon and future financial market conditions.
With respect to the price targets analysis, the future public market trading
price targets for First Horizon common stock prepared by research analysts prior
to February 25, 2022, as reported by Capital IQ and presented by Morgan Stanley,
were the following:
Analyst Price Target ($)
1 $23.00
2 $22.00
3 $22.00
4 $21.00
5 $20.00
6 $20.00
7 $20.00
8 $20.00
9 $20.00
10 $19.50
11 $19.00
12 $19.00
13 $19.00
14 $18.50
The subsection entitled "The Mergers-Unaudited Financial Forecasts" on page 61
the proxy statement is amended and supplemented by replacing the table "First
Horizon Financial Projections" with the following table:
First Horizon Financial Projections:
(in millions, except per share data) 2022E 2023E
Net Interest Income $2,003 $2,382
Non-Interest Income $971 $987
Total Revenue $2,975 $3,369
Core Non-Interest Expense $1,875 $1,920
Acquisition & Notable Expense $70 $0
Non-Interest Expense $1,945 $1,920
Provision for Loan Losses $0 $145
Net Income Available to Common Shareholders - GAAP $754 $961
Net Income Available to Common Shareholders - Core Excluding $809 $961
Acquisition & Notable Expense
Earnings per Share - Core Excluding Acquisition & Notable $1.52 $1.85
Expense
Diluted Shares Outstanding, Average 532 520
Risk Weighted Assets $67,669 $71,877
The last full paragraph in the subsection entitled "The Mergers-Unaudited
Financial Forecasts" on page 61 the proxy statement is amended and supplemented
by deleting the following strikethrough text and adding the following bolded and
underlined text shown below:
For purposes of extrapolating First Horizon's financial results, First Horizon
management provided Morgan Stanley with an estimated long-term annual growth
rate of 5.0%. For the First Horizon Street Forecasts, First Horizon management
provided a the 2023 cash return on tangible common equity estimate for First
Horizon of was 15.2%. For the First Horizon Financial Projections, First Horizon
management provided projections that yielded a 2023 cash return on tangible
common equity estimate for First Horizon of 15.6%. For purposes of Morgan
Stanley's dividend discount analysis, First Horizon senior management confirmed
that Morgan Stanley should use projected excess capital available for dividend
distributions derived from the First Horizon Financial Projections and the First
Horizon Street Forecasts as extrapolated for certain fiscal years, based on the
guidance of First Horizon senior management of an estimated long-term annual
growth rate of 5.0%, of (i) with respect to the
First Horizon Financial Projections, $96 million, $406 million, $546 million,
$650 million, $678 million, and $13.3-15.6 billion across the range of terminal
multiples and (ii) with respect to the First Horizon Street Forecasts, $96
million, $556 million, $573 million, $593 million, $618 million, and $12.4-14.5
billion across the range of terminal multiples, in each case as of fourth
quarter 2021 and for the calendar years 2022, 2023, 2024, 2025, and 2026
inclusive of the terminal value (based on the range of terminal forward
multiples and other assumptions outlined on page 58 of the joint definitive
proxy statement/prospectus in the subsection named "First Horizon Dividend
Discount Analysis"), respectively.
The third full paragraph under the subsection entitled "The Mergers-Interests of
Certain First Horizon Directors and Executive Officers in the Merger-Treatment
of First Horizon Equity Awards-First Horizon Director RSUs" on page 65 of the
definitive proxy statement is amended and supplemented by deleting the following
strikethrough text and adding the following bolded and underlined text shown
below:
The estimated aggregate amount that would be realized by the fifteen
non-employee directors of First Horizon in connection with the vesting of their
unvested First Horizon Director RSUs that are outstanding on May 6 April 1, 2022
(including associated dividends accrued thereon) if the merger were to be
completed on November 1, 2022 is $2,515,925 2,420,844 and the amount that each
First Horizon non-employee director would receive is as follows: Harry V.
Barton, $134,775; Ken A. Burdick, $159,625; John N. Casbon, $134,775; John C.
Compton, $256,275; Wendy Davidson, $234,200; William H. Fenstermaker, $134,775;
Michael James Kemp, Sr., $134,775; Rick Maples, $134,775; Vicki R. Palmer,
$134,775; Colin V. Reed, $173,425; Stewart Shea, $134,775; Cecelia D. Stewart,
$256,275; Rajesh Subramaniam, $223,150; Rosa Sugranes, $134,775 and R. Eugene
Taylor, $134,775. First Horizon awards First Horizon Director RSUs once a year
following its annual meeting of shareholders and most recently granted such
awards to the First Horizon non-employee directors on May 3, 2022. Accordingly,
First Horizon does not anticipate that any additional awards of First Horizon
Director RSUs will be granted to the First Horizon non-employee directors prior
to the completion of the merger (which, for these purposes, is assumed to be
November 1, 2022).
The first full paragraph under the subsection entitled "The Mergers-Interests of
Certain First Horizon Directors and Executive Officers in the Merger-Retention
Program" on page 70 of the definitive proxy statement is amended and
supplemented by adding the following bolded and underlined text shown below:
In connection with the merger, First Horizon intends to establish a broad-based
retention program to promote retention and incentive efforts to consummate the
merger and effectuate a successful integration, with over 90% of the available
retention pool allocated to employees other than the executive officers. Awards
under this retention program will generally be granted in the form of First
Horizon RSUs that vest in equal tranches on each of the first three
anniversaries of the closing date, subject to continued employment through such
date (or upon an earlier qualifying termination of employment). First Horizon's
non-employee directors are not eligible for awards under this retention program.
First Horizon's executive officers (including certain of First Horizon's named
executive officers other than Mr. Jordan) will be eligible to participate in
this retention program. However, as of the date of this proxy statement, no
determinations have been made as to any executive officer who will receive any
such retention award or the amount of such awards.
***
Forward-Looking Statements
This communication contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Exchange Act, with respect to First Horizon's beliefs, plans, goals,
expectations, and estimates. Forward-looking statements are not a representation
of historical information, but instead pertain to future operations, strategies,
financial results or other developments. The words "believe," "expect,"
"anticipate," "intend," "target," "plan", "estimate," "should," "likely,"
"will," "going forward" and other expressions that indicate future events and
trends identify forward-looking statements.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, operational, economic and
competitive uncertainties and contingencies, many of which are beyond the
control of First Horizon, and many of which, with respect to future business
decisions and actions, are subject to change and which could cause actual
results to differ materially from those contemplated or implied by
forward-looking statements or historical performance. Examples of uncertainties
and contingencies include factors previously disclosed in First Horizon's
reports filed with the SEC as well as the following factors, among others: the
occurrence of any event, change or other circumstances that could give rise to
the right of one or both of the parties to terminate the definitive merger
agreement between First Horizon and TD; the outcome of any legal proceedings
that may be instituted against First Horizon or TD, including litigation that
has been or may be instituted against First Horizon or its directors or officers
related to the proposed transaction or the definitive merger agreement between
First Horizon and TD related to the proposed transaction; the timing and
completion of the transaction, including the possibility that the proposed
transaction will not close when expected or at all because required regulatory,
shareholder or other approvals are not received or other conditions to the
closing are not satisfied on a timely basis or at all, or are obtained subject
to conditions that are not anticipated; interloper risk? the risk that any
announcements relating to the proposed combination could have adverse effects on
the market price of the common stock of First Horizon? certain restrictions
during the pendency of the merger that may impact First Horizon's ability to
pursue certain business opportunities or strategic transactions; the possibility
that the transaction may be more expensive to complete than anticipated,
including as a result of unexpected factors or events? diversion of management's
attention from ongoing business operations and opportunities? reputational risk
and potential adverse reactions or changes to business or employee
relationships, including those resulting from the announcement or completion of
the transaction? First Horizon's success in executing its business plans and
strategies and managing the risks involved in the foregoing; currency and
interest rate fluctuations; exchange rates; success of hedging activities?
material adverse changes in economic and industry conditions, including the
availability of short and long-term financing; general competitive, economic,
political and market conditions; changes in asset quality and credit risk? the
inability to sustain revenue and earnings growth? inflation? customer borrowing,
repayment, investment and deposit practices? the impact, extent and timing of
technological changes? capital management activities? other actions of the Board
of Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Tennessee Department of
Financial Institutions and other regulators, legislative and regulatory actions
and reforms; the pandemic created by the outbreak of COVID-19 and its variants,
and resulting effects on economic conditions, restrictions imposed by public
health authorities or governments, fiscal and monetary policy responses by
governments and financial institutions, and disruptions to global supply chains;
and other factors that may affect future results of First Horizon.
We caution that the foregoing list of important factors that may affect future
results is not exhaustive. Additional factors that could cause results to differ
materially from those contemplated by forward-looking statements can be found in
. . .
© Edgar Online, source Glimpses
FIRST HORIZON CORPORATION 
