(Bloomberg) — Toronto-Dominion Bank expects to raise about $14 billion through the sale of its entire stake in Charles Schwab Corp. as part of a corporate overhaul in the wake of its historic US money-laundering settlement.
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Toronto-Dominion will sell 184.7 million shares of Schwab’s common stock — representing 10.1% economic ownership — it said in a statement Monday, teeing up the biggest secondary share offering this year. Schwab has agreed to buy back $1.5 billion of its shares from TD, conditional on the completion of the offering.
The share sale is new Chief Executive Officer Raymond Chun’s first major strategic move after officially succeeding Bharat Masrani on Feb. 1. Chun, who was tapped for the top job in September, has spent the past several months conducting a strategic review of Toronto-Dominion’s operations.
Schwab shares fell as much as 3.5% Monday, while Toronto-Dominion rose as much as 3.8%.
Canada’s second-largest lender reached a settlement in October with the US Department of Justice and bank regulators over its failure to catch money laundering at several American branches. Toronto-Dominion agreed to pay almost $3.1 billion in fines and other penalties and last month said it slashed executives’ bonus pay in the wake of the scandal. It also faces a cap on its US retail banking assets.
Toronto-Dominion, Schwab’s biggest shareholder, expects to generate about $14 billion in proceeds through the share sale, Chun told bank employees in an internal memo Monday morning seen by Bloomberg. “In just under five years, this investment has generated a very strong return, and we believe this is the right time to reallocate the capital,” he said in the memo.
A representative for Schwab declined to comment, citing regulatory reasons.
Toronto-Dominion acquired its ownership stake in 2020 as part of a transaction to sell its interest in online brokerage TD Ameritrade Holding Corp. to Schwab. It sold 40.5 million Schwab shares in August, trimming its previous 12.3% stake to raise about $2.5 billion to help cover the expected cost of fines in the money-laundering probes.
If completed, the share sale would be the largest since Boeing Co. raised $24 billion in October through a combination of new shares and mandatory convertible preferred stock.
