Ameritrade Holding Corp., the Omaha-based discount broker, and TD Bank Financial Group, the Toronto-based parent of Toronto-Dominion bank, announced June 22 that Ameritrade will acquire TD's U.S. brokerage and custody business, TD Waterhouse U.S.A.. The combined company will be called TD Ameritrade (TDA) and will be led by Joe Moglia, current Ameritrade CEO. Under the agreement, TD Bank Financial will receive about 32% ownership in TD Ameritrade; Ameritrade shareholders will receive a special cash dividend of $6 per share, subject to closing (expected within six months, the companies said); and TD Bank Financial will acquire Ameritrade's Canadian brokerage operations for $60 million (U.S.) in cash.
The companies said that "had the two companies operated as a single entity
for the twelve months ended March 2005 with the full benefit of the expected synergies" from the merger, average daily client trades would be 239,000; pre-tax margins would be 52%; annual net income would be $557 million on revenue of $1.8 billion; and the company would custody more than $42 billion in RIA assets through 4,000 registered investment advisor relationships.
In a conference call with analysts and journalists, Moglia said that with the acquisition, "We are significantly extending our RIA relationships and we now have a full-scale branch network," and that the deal "puts us into the asset-gathering business."
Commenting on TD's motivations for the deal, Ed Clark, CEO of TD Bank Financial, said, "We wanted a combined entity that would focus on wealth management," and noted that while Ameritrade "owns the active trader space," it needed to attract longer-term investors via the TD Waterhouse branches and RIAs. However, Clark noted that "the market will determine whether this is a done deal…in the event that a superior offer comes forward." E-Trade Financial, for one, recently offered $2 billion for 49.5% of Ameritrade.
