Cowen Inc. shares rallied Tuesday on its $1.3 billion buyout by Canada’s TD Bank Group in a deal that had originally caught the investment bank by surprise.

TD Bank Group TD, -0.90% initially approached Cowen Inc. COWN, +8.13% to launch talks that led to a purchase price of $39 a share, a premium of about 10% over Cowen’s closing price of $35.49 a share on Monday.

Cowen stock jumped 7.6% in premarket trading Tuesday.

TD said it’s paying a purchase price multiple of 8.1 times Cowen’s estimated 2023 earnings to buy the company.

“When TD approached us with this idea, it was not something we were actively pursuing,” Cowen CEO Jeffrey M. Solomon said in a letter to clients on Tuesday. “This transaction is happening at a time of strength for Cowen, across all our businesses. By joining TD, we believe we will be able to leverage our unique strengths – as an organization and a platform – in an even bigger way for the benefit of our clients as well as theirs.”

For its part, TD Securities said Cowen will help it accelerate its long-term growth strategy in the U.S. by the addition of a “high-quality and rapidly growing investment bank with outstanding talent (1,700 employees) and highly complementary products and services.”

TD said it sold 28.4 million non-voting common shares of The Charles Schwab Corp. SCHW, -2.17% for proceeds of approximately $1.9 billion to fund the purchase. The transaction reduced TD’s ownership interest in Schwab to 12% from about 13.4%.

The deal comes just a few months after TD agreed to buy Memphis-based First Horizon Corp. FHN, +1.65% for $13.4 billion in a major bank tie-up that would give the Canadian lender an entry into the Southeastern market. That deal is expected to close by November.

TD stock is down about 15.9% so far in 2022, compared with a 13.6% drop in the S&P 500 SPX, -0.25%.