E-Trade's TeleBanc deal gets key OK
By Emily Church, CBS MarketWatch
Last Update: 2:59 PM ET Dec 20, 1999
NEW YORK (CBS.MW) -- E-Trade Group on Monday said it has cleared a key regulatory hurdle delaying its acquisition of the financial services firm TeleBanc Financial.
The online broker (EGRP) said that the U.S. Office of Thrift Supervision had deemed E-Trade's application for approval of its merger with TeleBanc (TBFC) "complete" on Friday.
The application represents the last step in the formal review process for the merger by the OTS, said Richard Zandi, an analyst at Salomon Smith Barney.
The deal had come been a cloud on fears that the OTS would put up a roadblock, but shares of TeleBanc, which offers electronic banking under the Telebank brand name, have recently rebounded somewhat as investors grew confident that the two online companies would complete their merger. Either company can walk away from the agreement after Dec. 31.
E-Trade's shares were down 1 3/8 to 28 11/16 in afternoon trading, while TeleBanc's shares rose 1/2 to 27 3/4.
While up from its lows of earlier this month, TeleBanc's share price on Monday still has room to go to meet the exchange ratio stipulated in the deal. If the merger goes through as planned, TeleBanc shareholders are slated to receive 1.05 shares of E-Trade for each TeleBanc share. At $27.75, TeleBanc's shares are trading at a discount of $2.37.
"The only issue now really is timing," said Zandi.
"I've heard some optimistic people out there saying (the deal will close) in a matter of day," the Salomon Smith Barney analyst said. Neither company "is publicly predicting a year-end close, but that doesn't mean they're not hopeful that the OTS acts promptly," he added.
E-Trade and TeleBanc said in a statement that they are"optimistic of an expedited regulatory approval process" and added that "both parties continue to work aggressively to close the transaction as quickly as possible and achieve rapid integration."
In a filing with the Securities and Exchange Commission in late November, the companies alerted investors to the possibility of the deal's not closing before year-end.
TeleBanc has called a special meeting of stockholders Dec. 28 to vote on the deal.
Emily Church is a managing editor for CBS MarketWatch.
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