ET ,,, Ameritrade Fends Off Offer From E-Trade Thursday May 12, 5:23 pm ET By Joe Ruff, Associated Press Writer Online Brokerage Ameritrade Affirms It's Not for Sale, Fends Off Offer From Rival E-Trade
OMAHA, Neb. (AP) -- Only a few hours after online brokerage Ameritrade Holding Corp. affirmed that it was not for sale, E-Trade Financial Corp. disclosed it had made an unsuccessful bid for its rival. ADVERTISEMENT
One analyst said a company as well-run and profitable as Omaha-based Ameritrade can afford to bide its time.
"Certainly this is Ameritrade trying to take control of the situation," said analyst Lauren Bender of Celent, a Boston-based consulting and research firm to financial services companies.
Either Ameritrade wants to remain independent or it is holding out for a better deal, Bender said.
"They have a lot of options," Bender said. "My guess is this came out of left field for them."
After several days of unconfirmed published reports that a bid had been made, E-Trade said it had offered stock and cash for Ameritrade.
It was not immediately clear how much E-Trade's offer was worth. But it came as online brokers are under pressure to cut costs amid falling trading volumes and intense price competition.
Ameritrade's shares, which were down 5 percent earlier in the day, rose 4 cents to close at $13.80 on the Nasdaq Stock Market. That gives it a market value of more than $5.5 billion. Its shares have traded in a range of $9.35 and $14.61 over the past 52 weeks.
Shares of New York-based E-Trade fell 34 cents to close at $12.04 on the New York Stock Exchange.
David Trone of Fox-Pitt, Kelton analyst, said Ameritrade and E-Trade are similarly sized companies, and neither wants to give up control.
"I see deals happening only when it's a big company buying a small company," Trone said.
Nor could E-Trade make an all-cash offer for Ameritrade. That kind of deal might have drawn more serious attention from Ameritrade's board, Trone said.
E-Trade said its proposal would give Ameritrade shareholders a 47.5 percent stake in the combined company plus about $1.5 billion in cash. It would also call for joint participation in senior management roles and representation on the board of the merged company. E-Trade chief executive Mitchell H. Caplan would have led the company, E-Trade said.
E-Trade forecast that the transaction would result in at least $650 million in cost savings and added revenue.
Ameritrade declined to comment on E-Trade's announcement.
In its news release earlier in the day, Ameritrade said it was confident in its own growth strategy.
"The board believes there will likely be further consolidation in the industry, but confirmed Ameritrade is not for sale," founder and chairman Joe Ricketts said.
Ameritrade chief executive Joe Moglia said Ameritrade has been involved with seven merger and acquisition deals in the past four years.
"Ameritrade is a leader in consolidating this industry," Moglia said. "We will continue to explore strategic opportunities, basing our decisions on whether a transaction will enhance shareholder value and benefit our clients."
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