TD-First Horizon Collapse Points to Merger-Arbitrage Traders’ Biggest Fear

 

• Traders previously bet on price cut near end-of-May walk date
• First Horizon sinks 40% on merger failure, regional bank woes

Merger arbitrage traders were expecting hiccups in Toronto-Dominion Bank’s proposed takeover of First Horizon Corp., but they were unprepared for what happened Thursday when the $13.4 billion transaction melted down.

The deal spread had been widening in recent months, as some traders were anticipating a price cut. But a total collapse weeks ahead of the May 27 deadline was not in the cards. Now, these traders are desperately seeking protection in a market that’s reluctant to give it as First Horizon shares nosedive.

https://www.bloomberg.com/news/articles/2023-05-04/td-first-horizon-collapse-points-to-arb-traders-biggest-fear