TD Bank has made a $3.6 billion (US$3.2 billion) bid to privatize its majority-owned U.S. subsidiary TD Banknorth Inc.

TD Bank today announced Monday a cash offer of US$32.33 per share, a 6.5% premium over the closing price of TD Banknorth on the New York Stock Exchange on Friday.

The boards of both banks have approved the deal.

“This transaction offers TD Banknorth shareholders an opportunity to realize fair value for their shares, while also offering TD Bank Financial Group shareholders the long-term benefits of 100% ownership of a U.S. banking business in an attractive marketplace,” TD president and CEO Ed Clark said in a news release.

“TD Banknorth’s strength has always been as a customer-focused bank and we don’t see that changing in light of today’s announcement.”

TD Bank currently holds about 57% of TD Banknorth’s 228 million shares. It acquired an initial 51% stake in March 2005 for $5 billion.

TD Bank said one large TD Banknorth stockholder has agreed to vote in favour of the deal and another is reviewing it and also expects to vote in favour. Together, they hold voting rights or investment discretion over 26.2 million, or 27%, of the 98 million shares TD Bank does not already own.

“Although these shareholders do not have voting authority over all of these shares, TD Bank expects the majority of these shares will be voted in favour of this transaction,” the bank said.

“On behalf of our shareholders, I am pleased that we have been able to reach an agreement for TD to acquire the balance of TD Banknorth’s outstanding shares,” said TD Banknorth chairman and CEO Bill Ryan.

“The transaction rewards our shareholders with a fair price and reaffirms TD’s long-term commitment to the U.S. banking industry.”

The deal requires majority approval by all shareholders as well as a majority of the outstanding shares not already held by TD Bank and approval by the Massachusetts Board of Bank Incorporation.

A special meeting of TD Banknorth stockholders will be held to vote on the deal, expected to close in March or April 2007.