TD Ameritrade and E*Trade in Merger Talks -- WSJ

The Wall Street Journal reports TD Ameritrade and E*Trade have been holding merger discussions over the past few weeks, which could result in a deal valued at as much as $20 billion. The combined company would have 11 million accounts, compared to Charles Schwab's 6.9M and Merrill Lynch's more-than 7M. The expected cost savings from combined operations are enticing, but sources say three hurdles stand between a merger agreement: First, TD Ameritrade is closely watching the quality of E*Trade's mortgage portfolio, which has been a growth engine, but is bringing volatility to its shares amidst widespread mortgage lending market turmoil. Secondly, the issue of who will run the combined company. Lastly, TD Bank, a 39% shareholder of TD Ameritrade, opposes a merger, and brings uncertainty considering what kind of control it will have post-merger. Shares of E*Trade jumped 6.4% to $15.57 on Tuesday, but are still down more than 30% over the past month. Ameritrade gained 1.1% to $16.35, but has lost more than 20% in recent trading.

Sources: Wall Street Journal
Commentary: E*Trade Plummets Over Mortgage Concerns • E*Trade's Growth Slows On Fewer Transactions and New Accounts • JANA, SAC Suggest TD AMERITRADE Merge With E*Trade, Charles Schwab
Stocks/ETFs to watch: ETFC, AMTD. Competitors: SCHW. ETFs: FDN, HHH, KCE
Earnings call transcripts: TD Ameritrade Holding F3Q07, E*TRADE Financial Q2 2007

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