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Ameritrade closes TD Waterhouse acquisition

Online brokerage Ameritrade Holding Corp. said Wednesday it completed its acquisition of TD Waterhouse Group Inc.’s U.S. retail securities business, and promptly announced plans to close two of its five call centers and 40 of the 140 branch offices it picked up as part of the deal.
/ Source: The Associated Press

Online brokerage Ameritrade Holding Corp. said Wednesday it completed its acquisition of TD Waterhouse Group Inc.’s U.S. retail securities business, and promptly announced plans to close two of its five call centers and 40 of the 140 branch offices it picked up as part of the deal.

Ameritrade also said Wednesday that its first-quarter income inched up 2 percent, to $86 million, before closing its acquisition.

The Omaha-based company announced the creation of TD Ameritrade Holding Corp. as a result of its $2.9 billion acquisition and increased its earnings forecast for the year ahead.

“TD Ameritrade gives us financial strength, accelerates our growth strategy and enhances our position as a leading industry player,” chief executive Joe Moglia said.

Ameritrade will keep its call centers in Omaha, Fort Worth, Texas; and San Diego while closing its centers in Jersey City, N.J.; and Yorkview, Canada.

Moglia said the remaining 100 branch offices would have about 530 employees, but it was not immediately clear how many jobs would be lost as a result of the changes.

Moglia said the company plans to invest in the remaining branches and add staff to attract more long-term investors. The company did not say which branches will close.

“Our focus will be on asset growth and new accounts,” Moglia said.

The TD Waterhouse deal closed on Tuesday, so Ameritrade’s shareholders will receive a $6 per share special dividend if they held the company stock at the close of business.

Ameritrade’s stock fell on the Nasdaq market Wednesday morning on the news that the dividend had been paid and that 196.3 million new shares were given to TD Bank Financial Group to complete the deal.

The company said the stock closed Tuesday as Ameritrade Holding Corp., and opened Wednesday as TD Ameritrade Holding Corp. The symbol did not change from AMTD, and the two never traded simultaneously.

Customers of TD Waterhouse and Ameritrade should not see many immediate changes, Moglia said. Both product lines will continue to be offered until the company launches a marketing campaign for the new TD Ameritrade brand later this spring.

In the first quarter that ended Dec. 31, record net revenues of $277.3 million helped Ameritrade post earnings per share of 21 cents. Net income grew nearly 2 percent over last year’s first quarter when the company earned $84.4 million.

Excluding a charge of about $12 million, or 1 cent per share, for liquidating the company’s investment in Knight Capital Group, Inc., Ameritrade’s earnings were in line with what analysts expected.

The analysts surveyed by Thomson Financial expected quarterly earnings per share of 22 cents on average on $274.4 million of revenue.

Ameritrade reported handling an average of 156,000 trades per day during the quarter, and 61,000 new accounts were opened. And the company handled client assets of about $85.5 billion.

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

That gives the Canadian bank 32.6 percent ownership in the new TD Ameritrade and makes it the largest shareholder in the new company. Also under the terms, TD Bank Financial will be offering 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 borrowed $1.9 billion to pay for the dividend and complete the deal. But Moglia told analysts that paying down that debt will be a priority for the company.

The company now expects even more benefit from the TD Waterhouse acquisition. The company added $100 million in new revenue to its forecast for the deal. Moglia said the company expects the deal to generate about $678 million over the next 18 months through a combination of cost savings and new revenue.

For fiscal year 2006, officials now predict earnings of 82 cents to $1 per share. Previously Ameritrade had predicted earnings of 80 to 99 cents per share for the year.

The company also revised all of its quarterly earnings per share predictions for the year: Earnings for the second quarter ending in March will fall between 22 cents and 28 cents; earnings for the June quarter will fall between 20 and 26 cents; and earnings for the September quarter will fall between 19 and 25 cents.