Thin trade

23 June 2005 By Rob Cox Follow @rob1cox

Companies rarely fend off an unsolicited bid by buying someone else. But the US broker s bid for rival TD Waterhouse may do just that. It arguably creates more value than E*Trade could. And Ameritrade has matched the cash portion of E*Trade s offer with a special dividend.

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Ameritrade Holding Corporation and TD Bank Financial Group, the US brokerage arm of Canada's TorontoDominion Bank, agreed to merge, creating one of the biggest US discount stock brokers and upsetting a rival offer for Ameritrade from E*Trade.

Ameritrade, which will own 68% of TD Ameritrade, said it expects the acquisition to yield $578m of cost cuts and revenue synergies within two years. In addition, Ameritrade shareholders will receive a special cash dividend of $6 a share. Of this, about $400m comes from TD and the rest from existing cash at Ameritrade and borrowings.

E*Trade never unveiled an official offer for Ameritrade. But it said it would have offered Ameritrade shareholders about half of the company, some $2.3bn in cash and promised $650m of synergies.

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