Wednesday, January 04, 2006

Ameritrade Votes to Acquire TD Waterhouse

Associated Press, Josh Funk and Chuck Brown, 4 January 2006

Omaha, Neb. (AP) -- Shareholders of online brokerage Ameritrade Holding Corp. approved the company's acquisition of TD Waterhouse Group Inc.'s U.S. retail securities business on Wednesday, an Ameritrade official said.

Voters approved each part of the $2.9 billion dollar deal, said Ellen Koplow, general counsel and corporate secretary of Ameritrade.

More details about the vote were not immediately available, Ameritrade spokeswoman Kim Hillyer said.

As part of the deal, Ameritrade will borrow almost $2 billion to pay each of its shareholders a $6 per share special dividend. Any investor who buys the stock and holds it when the deal closes, which is expected to happen on Jan. 24, will receive the dividend.

Those who held Ameritrade stock as of Nov. 16 were entitled to vote on the acquisition.

Analysts who follow the online brokerage industry have said the deal makes sense because it will likely give Ameritrade a leading position in the market.

Ameritrade expects to lead the online brokerage industry in trades after the acquisition by handling an average of 239,000 trades a day and to build on its roughly 25 percent share of the active investor market. By comparison, Charles Schwab Corp. reported 194,000 trades a day, on average, and E-Trade Financial Corp. said it handled 125,000 a day in the quarter that ended in September.

Here are the details of the $2.9 billion deal:

Ameritrade will give TD Bank Financial Group 196.3 million shares of Ameritrade stock and $20,000 cash for TD Waterhouse USA.

That will give the Canadian bank 32.6 percent ownership in the new TD Ameritrade, and make it the largest shareholder in the new company. Immediately after the deal closes, TD Bank Financial would offer to buy an additional 7.3 percent of outstanding shares for a minimum of $16 per share.

The agreement allows TD Bank Financial to have a maximum ownership of 39.9 percent for the first three years and a maximum 45 percent for up to 10 years. Toronto-based Toronto-Dominion Bank and its subsidiaries are known collectively as TD Bank Financial Group.

TD Bank Financial also will acquire Ameritrade's Canadian brokerage operations, for $60 million.

Ameritrade plans to obtain the financing for this acquisition from a consortium of Wall Street firms, including Citigroup Inc., Merrill Lynch & Co., UBS AG and JPMorgan Chase & Co. One loan of $1.65 billion is to be paid back in seven years, while a second loan of $250 million is due in six years. Ameritrade will also open a $300 million line of credit for operating capital.

Customers of Ameritrade and TD Waterhouse may have to wait until after the deal closes to learn exactly what this will mean for them. But a few things are clear.

Generally, the owners of TD Waterhouse's 2.3 million accounts will have to adjust to using Ameritrade's trading platform, and the owners of Ameritrade's 3.7 million accounts can expect to be offered investment advice through a nationwide network of branch offices created out of TD Waterhouse's 143 offices.