An Ameritrade-E*Trade Merger? Not as Crazy as It Sounds 35 comments
-
Font Size:
-
Print
- TweetThis
With good reason, several stock broker friends told me its time to buy E-Trade (ETFC). They believe its now largely undervalued after trading near $4 less than a month ago. Now at $2.23, ETFC may soon receive a buyout offer from TD Ameritrade (AMTD). Sources state $4 to $5 a share will be the offer from AMTD. A year ago analysts said ETFC could fetch between $10-$11 per share on a buyout deal. Now the book value is about $4.91 a share. Cost savings to an AMTD bottom line of a merger make a lot of sense now that ETFC has shed more of its banking assets creating a large amount of capital.
The talk about ETFC being bought by another online brokerage has been circulating for a while. Lots of people have the misconception AMTD would overlap with ETFC on many of its services if they end up acquiring it. Not true! AMTD is more of a traditional on-line brokerage. ETFC has more going for it, with nearly just as many customers and a role in personal loans and mortgages.
In 2003, the Toronto-Dominion Bank (TD) held talks to merge its TD Waterhouse discount brokerage with ETFC, but the two sides could not come to an agreement over control of the merged entity. In 2005, ETFC made an unsolicited offer for AMTD, currently the second largest US discount broker. AMTD instead purchased TD Waterhouse, with TD Bank holding a 39% stake in the new entity.
In 2005, ETFC acquired Harrisdirect, formerly a discount brokerage service of the Bank of Montreal (BMO), and BrownCo, formerly a discount brokerage service of J.P. Morgan (JPM).
In July 2008, ETFC sold its Canadian division to Scotiabank (BNS) for CAN$444 million, as part of a program of selling off non-core assets.
In March 2008, ETFC named Donald Layton, formerly JPMorgan Chase vice chairman, as its new CEO. Layton had joined ETFC board of directors in November 2007, at the same time as the Citadel deal. Layton has been aggressively acting on the turnaround plan and the company has stabilized and is seeing the beginnings of a return to growth.
Good news for banks: Treasury Secretary Henry Paulson announced late Friday night that the government would buy part ownership in an array of American banks. I bank with ETFC bank.
Disclosure: No positions yet. Will buy some ETFC.
Related Articles
|
Find People on SA
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most activeSee all
Instabloggers.
Top Instabloggers » -
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 35 comments:
"New trading" during these days, must be helping bottomline.
It is at least double from the current prices !
No, about $8-10 might do it, but $4-5 would not get it done. You are aware that Etrade's CEO, Donald Layton, spent $1M of his own money to buy Etrade shares at $4.07.
The merger makes sense, but at $4-5 it makes no sense.
So they can acquire Etrade without worrying about mortgage losses. Further, Etrade has enough cash on hand at the bank $1.8B and at the parent $700M to pay off almost ALL OF THEIR DEBT.
So do the analysis, what is a debt free, no loss Etrade worth? It's got to be near $15 at a minimum. If AMTD could pull it off near $10 it would be a tremendous steal.
Then they might have a platform that runs without crashing all the damn time.
I am long ETFC
ETFC started the turn around plan about a year ago and got rid of their toxic stuff very quick and only kept some with income producing potential. with the fed lowering the prime rate, it certainly helps the homeowners with heloc with the rate without hurting profit for etfc. with a recent market condition, many shorts had coverted their bet, we will not likely to see a "pop" on etfc anytime this year, but there are lots of cash sitting on the sideline just waiting for the storm to blow over. merger or not ETFC is a great brand name with very competitve products (prob. the best).... if anybody want's to invest in a brokerage company, ETFC is a better deal than AMTD or SCHW.
If someone offered me $5/share for E*Trade tomorrow, I'd say HELL NO. It would still be a decent profit for me, but I ultimately think it's worth a lot more if you can hold on for a year or two more. If you start talking about $7 - $10, now you have my full and undivided attention. However, I also think that's an unrealistic expectation since the PURCHASING company would be flamed by THEIR stockholders for paying multiple times the market price for E*Trade without a clear resolution to the HELOC portfolio.
If the government can help solve that problem with remaining HELOCs without major dilution... then we may just see a solution brewing that includes a merger or buyout between E*Trade and AMTD or SCHW. Until then, E*Trade will go-it-alone!
I mean, would you rather pay taxes or use that money to acquire a competitor and offset losses.
How can any fool think that $4-5 would be reasonable. Aside from all the conspiracy theorists that post here and elsewhere, ANSWER THAT QUESTION OR JUST SHUT UP.
If I can hear one reasonable answer to that point, then they would have a point. If not, they are just liars.
The TARP program gives a potential acquirer a loss-free (due to tax credits), debt-free (Etrade has free cash to pay down all debts just about) brokerage.
So, what is a debt-free, loss-free, perfectly healthy Etrade worth? $4-5/share. I think not.
i have not read any actuall share dilution on ETFC yet, can you provide a source for that info? i don't understand how fitting Citidel's agenda would equate to a slow motion raid on ETFC. perhaps i'm too simple minded but i think Citidel would enjoy the most profit if ETFC stock price goes through the roof and it would try it's best to make sure it happens that way.
8/share seems a bargain for Ameritrade. ETFC will probably take 10 to 12 share because their balance sheet looks good. They don't need to be acquired anyway. Their a good enough standalone company as it is.
On Oct 13 05:56 AM dan clue wrote:
> Etrade (ETFC) if they are acquired by Ameritrade (AMTD) what would
> it mean for the shorts? I would like to find out if they are in talks.
> Why else are the two of these heavyweights so silent through this
> turmoil. They are the beneficiaries during this time. Etrade share
> price is so low. They have more cash on hand then the all the shares
> combined.
STOP THE NON SENSE WITH THE MERGER TALK, YOUR GONNA GET BLINDSIDED WITH REALLY BAD NEWS ON E*TRADE!
On Nov 10 04:47 PM mark christo wrote:
> READ MY COMMENTS AT 4:41!!! GET OUT OF THIS STOCK!!!!
>
> STOP THE NON SENSE WITH THE MERGER TALK, YOUR GONNA GET BLINDSIDED
> WITH REALLY BAD NEWS ON E*TRADE!
That's a huge amunt of NEGATIVE remarks against ETFC...What specifically happened? Are you just short on ETFC? Or do you have something specific to say?
I have had excellent customer service from ETFC! I think everyone should buy this stock! It's going to be worth at least 6-8 per share in the near future...
Be looking in the WSJ for ETFC to take over AMTD very soon! All shorters beware, it's time to go long ETFC!
I hope all do well with this ETFC. However, those of you looking for stock advice on ETFC, you will mostly be led the wrong way if you're looking here for it.
2 words: DUE DILLIGENCE
On Nov 13 01:59 PM busajimmy wrote:
> My humble opinion= ETFC has been to easy to short for tooo long.
> This company has an excellent turnanround plan and they are executing
> it very well.
>
> I hope all do well with this ETFC. However, those of you looking
> for stock advice on ETFC, you will mostly be led the wrong way if
> you're looking here for it.
>
> 2 words: DUE DILLIGENCE