Following an aggressive campaign of well-reported wooing from E-Trade Financial Corp., Ameritrade Holding Corp. has now made a match with rival TD Waterhouse. TD Waterhouse, which is owned by Toronto-Dominion Bank, will become part of Ameritrade in an all-stock deal valued by the companies at $2.9 billion.
"This opportunity accelerates our long-term investor strategy with access to branches and advice, while maintaining an industry leading pre-tax margin," said Joe Moglia, CEO of Ameritrade and future CEO of TD Ameritrade. "We expect that it will create significant value for shareholders by generating substantial cost synergies and deliver a more diverse revenue mix by shifting to an asset-gathering model."
Together, the two companies have over 5.9 billion accounts with approximately $219 billion in client assets. According to estimates, had the companies merged a year ago, they would have been able to earn an extra $578 million during that time, between cost savings and new earnings opportunities.
Ameritrade will also sell its Canadian brokerage operations to TD Bank Financial Group for $60 million cash. TD Bank Financial Group will receive an initial ownership of about 32% in TD Ameritrade, and when the deal closes, Ameritrade shareholders will receive a special cash dividend of $6.00 per share which will be funded by Ameritrade borrowings, excess cash and capital contributed by TD Bank Financial Group.
This deal may be a signpost along the path of consolidation rather than an endpoint for Ameritrade. The company is not for sale, Moglia asserted.
"Don't assume, however, that consolidation for the industry is over, and don't assume that it's over for Ameritrade," he told the press on Wednesday.