Thursday, June 28, 2007

TD Ameritrade May Have Breached Duties, Jana, SAC Say

Bloomberg, Bradley Keoun, 28 June 2007

TD Ameritrade Holding Corp., the third-biggest online broker, was accused by two hedge funds of allowing executives from part-owner Toronto-Dominion Bank to thwart its sale.

Toronto-Dominion Chief Executive Officer Edmund Clark has played a ``significant role'' in merger discussions and is an ``impediment'' to a deal, Jana Partners LLC and SAC Capital Advisors LLC said today in a letter to Omaha, Nebraska-based TD Ameritrade. The funds, which are pressuring the company to merge with a rival, demanded access to boardroom minutes and other records related to any merger talks.

The records are needed ``to investigate whether any members of the board have breached their respective fiduciary duties,'' said the funds, which represent a combined 8.4 percent stake in TD Ameritrade. Toronto-Dominion is TD Ameritrade's largest shareholder, with a 40 percent stake, and has five of 12 seats on the company's board.

Jana and SAC have said a merger with Charles Schwab Corp., the biggest discount brokerage, or No. 4 E*Trade Financial Corp. may lead to as much as $800 million in annual benefits. A deal hasn't taken place partly because Toronto-Dominion wants to preserve the benefits of its ownership stake, including U.S. advertising that carries the initials ``TD,'' and favored access to the brokerage's banking business, the funds say.

``We've received the letter and we're reviewing it,'' said TD Ameritrade spokeswoman Katrina Becker.

Clark, speaking to reporters today after a company-hosted meeting for investors in Toronto, said he didn't want to respond to "people making up allegations that have no basis in fact.''

"This is a game that they play,'' Clark, 59, said. "If you knew all the facts, the TD Ameritrade board is managing the situation to impeccable standards.''

Jana, headed by Managing Partner Barry Rosenstein, and SAC, led by CEO Steven Cohen, said they made the records request based on corporate law in Delaware, where TD Ameritrade is incorporated. The funds may ask a court to order the disclosures if the company doesn't respond within five days.

Larry Hamermesh, a professor at Widener University School of Law in Wilmington, said the funds may be using the request as a pressuring tactic. The court is unlikely to side with them without more serious allegations of misdeeds, he said.

TD Ameritrade said earlier this month it was willing to engage in talks with merger partners. Toronto-Dominion representatives also said their interests are aligned with those of other shareholders.

TD Ameritrade's shares rose 3.8 percent on June 6, the day after the hedge funds' stake was disclosed. The stock fell 5 cents to $20.09 in 4 p.m. composite trading on the Nasdaq Stock Market.