The prospective target of a purchase offer, Ameritrade instead says it will be the one making acquisitions.
The online stock trader has made seven acquisitions in the past four years. Ameritrade “is a leader in consolidating this industry,” according to CEO Joe Moglia. Ameritrade has been talking to Canadian bank Toronto-Dominion about acquiring TD Waterhouse.
The rejection of the offer may be a simple attempt to force E-Trade into making a higher offer. Both companies enjoy high profit margins, as their operations run electronically, and there does not appear to be any pressure on either firm to enter into a merger.
E-Trade disclosed terms of the deal to the media. They offered $1.5 million USD in cash, plus a 47.5% interest for Ameritrade shareholders in the merged company. Ameritrade’s market value of nearly $5.6 billion weighed against the offer, which valued the company at slightly less.
Both companies, and trading firms in general, have been hurt by the spate of Federal Reserve rate increases. Should the Fed refrain from continuing the current trend of rate hikes when the board meets in late June, business should pick up for Ameritrade and E-Trade.
Strength Through Growth
But some analysts speculate the only growth opportunity for the industry will come through mergers. E-Trade offers more financial products than Ameritrade, especially banking products, and a merger gives them the opportunity to market those items to Ameritrade clients.
Mergers and acquisitions will continue in the industry, as trading firms emulate the exchanges. The NYSE will acquire electronic trader Archipelago, and Nasdaq will merge with Instinet, according to the New York Times.
David Utter is a staff writer for murdok covering technology and business. Email him here.
