TD Bank to make an offer for online brokerage Datek
Bid to bulk up Waterhouse
Derek DeCloet
Financial Post, with files from Reuters
Toronto-Dominion Bank will make a bid for Datek Online Holdings Corp., but bank executives are not optimistic they will win an auction for the discount brokerage, sources say.
"We're pursuing it, but not aggressively," said a TD source, speaking on condition of anonymity. "We don't expect to get it."
A report in The Wall Street Journal yesterday placed TD as one of several financial institutions that have "expressed interest" in Jersey City, N.J.-based Datek.
TD owns one of the world's largest discount brokerages, TD Waterhouse Group Inc. It is one of the top four in the United States, behind Charles Schwab Corp., E*Trade Group Inc. and, according to some rankings, Fidelity Brokerage Services LLC.
TD bank reorganized its wealth management division this year, recalling Stephen McDonald, chief executive of TD Waterhouse, from New York to Toronto to lead the hunt for U.S. acquisitions.
Adding Datek's 850,000 accounts would make TD Waterhouse almost as large as E*Trade. However, an analyst suggested it would also cost more than TD would be willing to pay -- US$1-billion to US$1.4-billion.
Datek's owners -- a handful of private equity firms led by Bain Capital Corp. -- have been quietly shopping the brokerage since they received an unsolicited bid for the firm earlier this year, sources said.
The investor group, which also includes TA Associates and Silver Lake Partners, then started to explore a sale in earnest. The group bought a 70% stake in Datek for US$700-million in December, 2000, which valued the business at US$1-billion at the height of the Internet boom.
Besides TD, other likely bidders include E*Trade, Bank of America, Ameritrade Holding Corp., and commercial bank Wells Fargo, sources said.
E*Trade has remained actively involved in the bidding, sources said, and is given a strong chance of being among the finalists. The Menlo Park, Calif.-based company has shown an acquisitive bent in the past and is looking to continue building scale, analysts said.
Ameritrade is also looking to bulk up, but it has far less currency to bid with. The Omaha-based firm's stock, hurt by the continuing market slowdown, closed yesterday at just US$6.43 and the company has very little cash to spend.
Bank of America's interest surprised some industry experts, but it clearly shows the No. 3 U.S. bank is moving ahead with plans to become a stronger competitor to financial conglomerates like Citigroup Inc. and J.P. Morgan Chase & Co.
"If you are in the business already, there's going to be the big advantage of being able to integrate costs," said Richard Ripetto, an analyst with Putnam Lovell Securities. "On the other hand, if a bank buys them, there are significant opportunities for cross-selling different products."
Jeff Keay, a TD bank spokesman, said the bank would not comment on rumours about the bidding process. |
