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TD Bank Group unveiled Tuesday the full details of its $13.1 billion divestiture from financial powerhouse Charles Schwab Corp., marking a major shift in strategy as the Canadian lender exits its 10.1% stake in the brokerage giant.

This decision, which comes just four years after TD acquired its shares in Schwab, represents a calculated move to unlock capital, repurchase shares, and accelerate growth.

Breaking Down the $13.1B Deal

TD, which holds 184.7 million Schwab shares, will sell 165.4 million shares via a registered offering at $79.25 per share. Additionally, Schwab has agreed to buy back 19.2 million shares for $1.5 billion, further cementing its commitment to shareholder value.

The sale, expected to close Wednesday, will generate an estimated CA$20 billion ($13.97 billion) in net proceeds for TD, after taxes and underwriting costs.

TD CEO: “A Strong Return” on Investment

TD had previously hinted at its Schwab exit but didn’t disclose the financial terms until Tuesday. CEO Raymond Chun framed the move as a strategic recalibration.

"As part of our strategic review, we have been evaluating capital allocation and have made the decision to exit our Schwab investment," Chun said. "We are very pleased with the strong return we are generating on the Schwab shares we acquired in 2020."

TD plans to use CA$8 billion of the proceeds for a stock repurchase program, while reinvesting the rest to fuel organic growth and enhance client services.

Schwab’s Stance: Buybacks on the Horizon

Despite TD’s exit, Schwab remains focused on opportunistic stock repurchases, reiterating in a Monday statement that it plans to buy back shares in 2025, provided it aligns with financial goals. The brokerage firm also confirmed that it will not receive any proceeds from TD’s sale.

TD’s Lingering Regulatory Woes

TD’s strategic pivot comes against a backdrop of regulatory turbulence. In October, the bank agreed to pay $3.1 billion in fines to U.S. authorities over anti-money laundering failures, which reportedly enabled hundreds of millions of dollars in illicit transactions, including those tied to drug trafficking.

While TD’s exit from Schwab is a financial decision, it also underscores the bank’s efforts to regain control over its U.S. operations amid heightened scrutiny.

Legal Counsel and Closing Conditions

The deal remains subject to final closing procedures, with Wachtell, Lipton, Rosen & Katz advising Schwab, while Allen Overy Shearman Sterling US LLP represents the underwriters.