Updated from 12:34 p.m. EST
First Horizon National
for scrapping a deal to sell nine Atlanta branches to the Midwest bank.
Fifth Third filed a complaint on Friday in the U.S. District Court of Southern District of Ohio, Western Division of Cincinnati, which was disclosed by the Cincinnati-based bank on Friday afternoon.
The bank claims that less than a week before closing the deal, First Horizon had doubled the maximum price agreed upon for the branches after submitting a "pre-closing date balance sheet," according to the complaint. First Horizon had entered the higher price because it claimed that the agreed upon transaction did not include most of the branches loans, when in fact it did, according to Fifth Third. Neither purchase price was disclosed in the complaint.
Fifth Third wants the deal closed under its original terms and is seeking to recover costs incurred in preparation of the purchase of the branches.
A spokesman for First Horizon said the company was unable to discuss the pending litigation. Fifth Third declined to comment beyond the complaint.
Early Friday, Memphis-based First Horizon announced that the deal -- originally supposed to close on Friday -- was terminated after the two banks could not reach an agreement concerning "a key term" of the contract, it said
First Horizon, troubled by the mortgage industry deterioration, said last summer that it would sell or close 34 bank branches in four underperforming markets -- Virginia, Georgia, Texas and Maryland -- that were likely to remain unprofitable. The company announced in September that it was selling the 34 branches to four companies:
, Fifth Third,
( SBIB) and two branches to subsidiaries of FMCB Holdings of Senoia, Ga.
First Horizon's planned sale of 10 branches in the Dallas/Ft. Worth area to Sterling is still expected to be completed Friday, it said. M&T Bank purchased 12 branches in Washington, D.C. and Baltimore in December.
As a result of the deal's termination, First Horizon says it no longer expects to book a gain from the sale of the branches in the first quarter. It also anticipates $30 million in cost savings from divesting all 34 branches "will be delayed." The bank still expects to recognize $25 million in cost savings by the end of the second quarter.
Charles Burkett, First Horizon's head of national banking, said the bank will "explore the strategic alternatives for what is an attractive franchise in these First Horizon Bank branches in Atlanta," in a statement.
Fifth Third had warned in its own statement earlier Friday that the deal termination is "an unjustified breach of the agreement by First Horizon" and that it "will seek all available legal remedies."
"The deal was struck last September and the agreement was straightforward and complete," Fifth Third said. "After receiving all necessary regulatory approvals and investing over the last several months considerable time, energy and resources, First Horizon is now not satisfied with the terms of the purchase agreement and has chosen not to move forward with the branch sale."
Shares of First Horizon closed down 4%, while Fifth Third's stock was off 2.7% on Friday.