김형래의 개구리운동장

By Reuters. June 22, 2005

NEW YORK (Reuters)—Online broker Ameritrade Holding Corp. on Wednesday said it agreed to buy rival TD Waterhouse USA from parent Toronto-Dominion Bank for $2.9 billion in stock, consolidating the struggling online brokerage sector as analysts had said was inevitable.

Ameritrade said Canada's TD Bank would retain a 32 percent stake in the merged company, to be called TD Ameritrade, as part of the deal. Ameritrade shareholders would receive a special cash dividend of $6 per share.

Ameritrade valued the combined company at $9 billion.

"For the companies, it's a logical play," said Andrew Fishman, president of trading firm Schonfeld Group. "It clearly makes Ameritrade the leader in this space."

The agreement now raises questions over rival E-Trade Financial Corp.'s next move. E-Trade, which could be left without a large takeover target in the brokerage sector if the deal is completed, tried aggressively to scuttle talks between Ameritrade and TD Waterhouse as it pursued its own bid for Ameritrade.

Omaha, Nebraska-based Ameritrade rebuffed E-Trade's first bid, an offer of 47.5 percent of the combined company plus $1.5 billion in cash.

After Ameritrade and TD Waterhouse USA confirmed they were discussing a possible deal, a source close to the situation said E-Trade sweetened its bid and offered a 49.5 percent stake in the combined company and about $2 billion in cash.

Analysts have long expected a deal between two of the discount online brokerages, and many have said a match between Ameritrade and TD Waterhouse made the most sense.

The discount brokerages are trying to add heft to cut costs and offset slipping trading volumes, after individual investors who got burned in the dot-com crash of 2000 backed away and sank online trading volumes.

"You have an industry in which volumes are clearly down from historic highs," Schonfeld Group's Fishman said. "So if you can reduce costs by combining more customers on one platform, eliminate personnel, and spread it out over a bigger customer base, it's clearly going to be a very profitable endeavor."

Shares of Ameritrade rose 17.5 percent to $17.42 on Nasdaq after the agreement was announced.

Ameritrade said it expects the deal to close in about six months and add to earnings within 12 months. It said its chief executive, Joe Moglia, would be CEO of the enlarged group.

Ameritrade also said it would sell its Canadian brokerage operations for $60 million in cash to TD Bank. TD Bank, Canada's No. 2 by assets, will rebrand the Ameritrade business under the Waterhouse banner and merge it into its domestic Waterhouse unit.
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Analysts gave a broad thumbs-up on Thursday to Toronto-Dominion Bank's sale of its Waterhouse USA unit to Ameritrade Holding Corp., a deal that will give TD a hefty stake in a top player in the competitive discount brokerage industry. The deal, announced on Wednesday, will give TD a 32 percent interest in the $9 billion merged company in exchange for a Waterhouse USA franchise that had struggled with weak profits and softening trading volumes. File photo shows TD President and CEO Ed Clark at the company's annual general meeting in Ottawa, March 23, 2005.


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