Friday, June 24, 2005

Ameritrade & TD CEOs, a Brokerage Odd Couple

Different men claim similar standards

The Globe and Mail, Sinclair Stewart, 24 June 2005

Effusive doesn't begin to describe Joe Moglia. Two days ago, during a conference call to unveil his company's $2.5-billion (U.S.) deal with TD Waterhouse, an analyst jokingly thanked the Ameritrade Holding Corp. chief executive officer for not cursing him in Italian after he asked a question. A giddy Mr. Moglia couldn't resist the temptation to oblige, unleashing an incomprehensible string of sentences that left puzzled listeners scratching their heads.

As it turns out, he wasn't cursing at all. He was serenading the analyst with a love song that begins: "Your eyes shine like the stars."

"I don't speak Italian, but I remember the words to that song," explained Mr. Moglia, a 56-year-old New Yorker who spent 16 years as a college football coach before finding his way to Wall Street. "I'm sure I pronounced all the words wrong."

It's difficult to know just what was going through Ed Clark's mind as he sat through this offbeat improvisation. On the surface, the blunt-talking, buttoned-down CEO of Toronto-Dominion Bank is the antithesis of Mr. Moglia, and together they look like the discount brokerage industry's own odd couple.

But Mr. Moglia is convinced they have enough in common to make their marriage work.

"Whether it's been my 21 years on Wall Street or whether it's been my 16 years as a coach, any real success I've had is because I've made good bets on people. So you put the right people in the right slots, everybody knows what our objective is [and] let them go," said Mr. Moglia, adding, with his penchant for gridiron metaphor, that he is capable of the occasional Knute Rockne speech to motivate his charges.

"That's frankly very, very, similar to what's Ed's philosophy is -- that's part of the reason we get along."

On Wednesday, they announced a deal to fold TD Waterhouse into the operations of Omaha, Neb.-based Ameritrade and create the world's No. 3 on-line broker in assets and customers.

Mr. Moglia will run the show as head of the combined TD Ameritrade, while TD will exert its influence from the sidelines as the company's largest single shareholder. The bank will take a 32-per-cent stake once the deal closes at the end of this year, and then immediately increase it to 39.9 per cent.

For both men, this was a long time in coming. Ameritrade reached out to TD about a potential partnership in the fall of 2002, and since then the talks have flickered on and off. The lengthy courtship, however, has given them a chance to get to know one another.

Mr. Moglia concedes he is probably a little "louder" and more animated than Mr. Clark, and acknowledges their styles contrast somewhat. But he says they have similar standards and expectations, two traits that often manifest themselves as toughness.

Mr. Clark, not exactly a shrinking violet, offered some plain words on Mr. Moglia's tough negotiating style when asked whether TD had effectively wrested control of Ameritrade by taking a large minority chunk of the company.

"You have no idea what a son of a b*tch Joe Moglia is, so I don't think that's true," Mr. Clark joked in an interview while the Ameritrade boss was with him.

Mr. Moglia's extroverted, often cheery demeanour belies his hard-nosed ethic. His accent still betrays his roots as a streetwise kid growing up in a rough-and-tumble area of Manhattan's Washington Heights, where he once ran with a gang.

He helped coach a high-school football team to put himself through college, and then turned it into a lengthy career once he graduated, even writing a book on the subject. It wasn't until 1984 that he joined Merrill Lynch & Co. as a broker, eventually overseeing the firm's investment products division before departing to Ameritrade in 2001.

As unconventional as his style may be -- he has used other conference calls to offer up his predictions on the SuperBowl -- his success at acquiring companies for Ameritrade and his reputation as a turnaround artist is likely one of the main reasons TD chose to do this deal, industry observers suggested.

Mr. Clark is a big believer that successful foreign acquisitions depend on strong management, and Mr. Moglia has a proven track record on his last seven deals, including the purchase of Datek Online Holdings Corp. in 2002.

Indeed, his continuation as Ameritrade's CEO was one of the conditions TD stipulated when it began merger talks. Mr. Moglia had been planning to retire, possibly as early as this fall, and said he would have likely followed through if the TD Waterhouse transaction hadn't occurred.

"He's extremely well-liked by investors," said Richard Repetto, an analyst with Sandler O'Neill & Partners in New York. "He's a straightforward guy. He's sort of a guy's guy."

He is also seemingly tireless. After announcing the TD Ameritrade merger, he stayed up until 3 o'clock in the morning, answering more than 100 e-mails and a few dozen phone messages. He was up a few hours later, speaking with a phalanx of reporters and selling his merger to the television cameras, which he does with evident enjoyment.

This was a three-way fight, after all, and if you believe the analysts or the stock charts, Mr. Moglia has emerged as the victor.

E*Trade Financial Corp. would be the loser. The rival firm launched a hostile $6-billion offer for Ameritrade last month in an effort to disrupt its merger with TD Waterhouse.

Ameritrade rejected the bid late Tuesday night, but Mr. Moglia admits he was in an enviable position with two deals to choose from, despite the added distractions. Many speculate the involvement of E*Trade forced TD to substantially sweeten its deal, and cough up an extra $400-million to help pay a special dividend for Ameritrade investors.

"[We] did have two good offers on the table. Both gave us good [synergies], both enhanced our profitability, but at the end of the day the TD opportunity was a better long-term fit strategically," he said. "And it also turned out to be a better financial deal."

Mr. Moglia will now preside over a company with $1.8-billion in annual revenue, $219-billion in customer assets, and 239,000 average daily trades, the most active trading base in the industry. Unlike E*Trade, TD Waterhouse also gave Ameritrade access to more than 140 branches and a stable of investment advisers, something the U.S. discounter was seeking as a means of expanding beyond its traditional niche as a low-cost trading platform.

Mr. Moglia refuses to speculate on how long he will stick around at TD Ameritrade, other than to say he is committed to remaining as CEO, and perhaps even taking a run at some other targets in the thinning ranks of discount brokers.

Beyond that, he says he still has an itch to reconnect with football, only this time, he has his eyes on the pros.

"It might be fun one day to combine the skill sets and the experiences of what I learned as a business person and what I learned in football," he said. "If it's football and business, it would probably have to be something associated with the NFL."

Scouting report

Joe Moglia, who is set to take the reins of TD Ameritrade later this year, will lean heavily on his football coaching experience to guide the world's No. # discount broker. The Ameritrade CEO has developed a unique leadership style that draws as much from the locker room as it does from the boardroom.

Age: 56

Vital Stats: 5 feet, 11 inches

Current Position: CEO, Ameritrade Holding Corp.

Experience: 17 years at Merrill Lynch & Co.; 16 years as a football coach, including two seasons as defensive co-ordinator at Dartmouth College.

Awards: Two Ivy League Championships

Education: BA in economics, Fordham University, Masters in secondary education and social sciences, University of Delaware

Books: Coach Yourself to Success: Perimeter Attack Offense

Hero: Vince Lombardi, legendary coach of the Green Bay Packers

Birthplace: Washington Heights, New York City

Current residence: Omaha, Nebraska

Family: wife Amy, four children, two stepchildren, and three grandchildren

Career aspirations: Running TD Ameritrade; possibly a job with the National Football League that combines his business and gridiron experience


"Whether it's been my 21 years on Wall Street or whether it's been my 16 years as a coach, any real success I've had is because I've made good bets on people."

"I think I can be very, very motivating...There are Knute Rockne speeches in me."