A possible deal between Banknorth Group Inc. and Toronto-Dominion Bank may just be the marriage of convenience both have been looking for, analysts said Wednesday.

Both companies confirmed a report in the Wall Street Journal that the two are in advanced talks for Toronto-Dominion to buy a controlling interest in Banknorth in a deal valued as much as $3.5 billion. The deal would value Banknorth shares at between $6.5 billion and $7 billion, resulting in about a 50% stake by Toronto-Dominion.

“While the structure of the deal is still unknown, from my perspective, I was a little surprised that Banknorth would consider this type of transaction,” said a senior analyst at C.L. King & Associates, Kevin Timmons. “I would have thought that the company would pursue staying totally independent or decide to completely sell out.”

But Mr. Timmons added the deal would make sense for Banknorth by offering shareholders a takeover premium while still building on its stable franchise.

As for Toronto-Dominion, it would allow the company to develop a retail banking presence in the U.S. – an increasingly attractive market for foreign banks.

Banknorth, which has long been proud of its New England heritage, has made no secret about its intention to expand its reach beyond the New England market and into the competitive metro-New York playing field.

But for a bank with assets of nearly $30 billion, entering the mature New York market would prove difficult from a financial standpoint.

“For some time, Banknorth was at a competitive disadvantage in terms of acquisitions because its competitors, [such as] Citizens [Financial Group] have parents with deep pockets,” said the director of research at Sandler O’Neill, Mark Fitzgibbon.

While Banknorth has been an aggressive acquirer of smaller banks – the company has scooped up 13 smaller banks since 1997 – a deal with Toronto-Dominion would provide the capital and capacity to assist with Banknorth’s goal of entering the New York market, analysts said.

But by considering selling a controlling stake in the company to a foreign bank, Banknorth’s chairman and chief executive William Ryan is making a bold move – breaking away from the New England roots it has nurtured for so long and allowing another company a say in the way the business is run.

In an interview with the Dow Jones Newswires in March, Mr. Ryan said the company was playing up its home advantage to the fullest to attract new customers given the recent merger between competitor FleetBoston and Bank of America Corp. And analysts said part of the company’s charm in the region is the fact that it’s the only major player that’s homegrown, based in Portland, Maine.

“On the positive side, a deal with Toronto-Dominion, would be a way to access capital easily,” said C.L. King’s Mr. Timmons. “On the negative side, it reduces the company’s ability to go to a smaller, local player and say I’m a New England guy.”

But Mr. Timmons said the potential for growth through a deal with Toronto-Dominion would outweigh the loss of marginal New England transactions.

And analysts weren’t expecting Mr. Ryan, who’s spearheaded Banknorth’s strong franchise, to give away control of the business.

Anthony Polini, analyst at Midwest Research, said Banknorth could structure a deal with Toronto-Dominion that even if the Canadian bank had a 51% stake in the company, Banknorth, as a minority owner, could still be in control of the operation.

Sandler O’Neill’s Mr. Fitzgibbon agreed, adding Banknorth’s Mr. Ryan is a strong manager and he would likely negotiate the ability to stay in charge, which shouldn’t change the company’s focus.

Analysts added that Canadian banks tend to have a more hands-off approach when buying an American bank. Royal Bank of Canada, for instance, owns RBC Centura and RBC Dain Rauscher. For Toronto-Dominion, a deal with Banknorth would be the company’s entry into the American retail banking market.

While the deal is still in its final stages, Banknorth investors are already enthusiastic. Shares of Banknorth climbed 3.18,or 10.03%,to 34.88 on volume of 3.2 million shares. Average daily volume is 435,583 shares.

Toronto-Dominion fell $1.02, or 2.9%, to 34.17 on volume of 129,900 shares. Average daily volume is 41,132.

C.L. King’s Mr. Timmons, Midwest Research’s Mr. Polini and Sandler O’Neill’s Mr. Fitzgibbon don’t own shares of Banknorth or Toronto-Dominion and their respective firms don’t have an investment banking relationship with the companies.