TD Amer­i­trade to buy Scot­trade in $4 bil­lion cash-and-stock deal

Daily Local News (West Chester, PA) - - WEATHER - By Josh Funk AP Busi­ness Writer

OMAHA, NEB. >> On­line bro­ker­age TD Amer­i­trade is buy­ing Scot­trade in a $4 bil­lion cash-and-stock deal that would sig­nif­i­cantly ex­pand its branch net­work at a time when many fi­nan­cial firms are ex­pand­ing au­to­mated ad­viser pro­grams.

In the two-stage deal an­nounced Mon­day, TD Bank Group will buy Scot­trade Bank first from Scot­trade Fi­nan­cial Ser­vices Inc. for $1.3 bil­lion in cash, and Scot­trade Bank will be folded into TD Bank

Then, TD Amer­i­trade will buy Scot­trade Fi­nan­cial Ser­vices for $2.7 bil­lion in cash and stock. Part of that pur­chase will be fi­nanced by sell­ing 11 mil­lion shares to TD Bank, which will con­tinue to con­trol 41 per­cent of TD Amer­i­trade’s stock.

TD Amer­i­trade said that the trans­ac­tion adds sig­nif­i­cant scale to its re­tail busi­ness and more than quadru­ples the size of its net­work of about 100 branch of­fices.

TD Amer­i­trade CEO Tim Hockey said the branches should help it bet­ter serve clients and ex­pand into more mar­kets although the com­pany will prob­a­bly close about 150 of the 600 branches it will have af­ter the deal.

“Fi­nan­cial de­ci­sions are very im­por­tant to peo­ple and they like talk­ing with some­one they know and they can talk to in their com­mu­nity,” Hockey said.

TD Amer­i­trade an­tic­i­pates about $450 mil­lion in com­bined an­nual ex­pense sav­ings.

Com­bined, TD Amer­i­trade and Scot­trade had $944 bil­lion in to­tal client as­sets and 600,000 av­er­age client trades per day for the year ended Sept. 30, on a pro forma ba­sis.

“It gives us ex­tra­or­di­nary scale,” Hockey said. “With that scale, those in­vest­ments in tech­nol­ogy will be spread over more clients.”

CFRA Re­search an­a­lyst Cathy Seifert cut her rat­ing on TD Amer­i­trade’s stock to “Hold” from “Buy” but she said the deal should pro­vide a boost.

“We view pos­i­tively AMTD’s planned pur­chase, for $4B, of Scot­trade Hold­ings, since it should help AMTD’s slow­ing rev­enue growth,” Seifert said.

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