Canada's Toronto-Dominion Bank (TD) will buy Commerce Bancorp Inc (CBH) in a cash-and-stock deal worth $8.5 billion which will expand its footprint in the United States, the banks said on Tuesday.

The transaction, involving 75 percent stock and 25 percent cash, will see TD, Canada's second-biggest bank, take a one-time pretax restructuring charge of about $490 million.

Commerce shareholders will get 0.4142 of a TD common share and $10.50 in cash for each common share of Commerce Bancorp.

That values the deal at $42.37 per Commerce share, based on TD's closing price on Monday on the Toronto Stock Exchange, the banks said in a statement. Commerce, New Jersey's largest bank, closed at $39.74 on the New York Stock Exchange on Monday.

The deal will close in March or April 2008, subject to approval of Commerce shareholders and US and Canadian regulators.

To reduce exposure to changes in interest rates, Commerce said it will sell a portion of its fixed-rate investment securities portfolio and reinvest in short-term or floating-rate AAA-rates securities.

This will result in an after-tax charge of about $150 million for Commerce in the third quarter.

TD said the transaction is expected to be 28 cents dilutive to its fiscal 2008 earnings, and 22 cents dilutive in 2009. On an adjusted basis, it will be 10 cents dilutive in 2008 and flat in 2009.

In June, Commerce announced the departure of its longtime chief executive Vernon Hill. Analysts said the move left the bank vulnerable to a takeover, which Hill had long resisted