Online broker E-Trade Financial Corp. has dropped its pursuit of rival Ameritrade Holding Corp. which Wednesday announced a deal to buy TD Waterhouse USA, a source familiar with the situation said Thursday.
Ameritrade struck a deal to buy TD Waterhouse USA from parent Toronto-Dominion Bank on Wednesday, consolidating the struggling online brokerage sector as analysts had said was inevitable.
In a separate development, an Ameritrade spokeswoman said that staff numbers at the combined Ameritrade/TD Waterhouse USA may be slimmed down by about 1,400 in the next two years, taking the work force to 3,000 from about 4,400.
E-Trade drops pursuit
Ameritrade’s deal to buy TD Waterhouse USA had raised questions over whether rival E-Trade would weigh in with a counter offer. E-Trade had tried aggressively to scuttle talks between Ameritrade and TD Waterhouse as it pursued its own bid for Omaha, Nebraska-based Ameritrade.
In May, Ameritrade rebuffed E-Trade’s first bid, an offer of 47.5 percent of the combined company plus $1.5 billion in cash.
In early June, after Ameritrade and TD Waterhouse USA confirmed they were discussing a possible deal, E-Trade sweetened its bid and offered a 49.5 percent stake in the combined company and about $2 billion in cash.
The source said Thursday that E-Trade was no longer pursuing Ameritrade.
Some analysts had doubted that E-Trade would weigh in. In a note published earlier on Thursday, analyst Michael Hecht at Banc of America Securities wrote: “For now it looks like ET will be left on the sidelines and we believe a counter offer is unlikely to be extended or accepted.”
E-Trade declined to comment on Ameritrade.
Job cuts ahead
Separately, it emerged that significant job reductions are likely from Ameritrade’s deal with TD. Ameritrade spokeswoman Donna Kush said Thursday that the combined group could slim down staff numbers within about 18 months of the deal closing.
The deal is expected to close in about 6 months from now, meaning the job reductions are expected to be in place in about two years time.
“In total, there are about 4,400 employees between TD Waterhouse USA and Ameritrade. With the synergies, part of that is looking at areas where there is overlap...” said Kush.
“As part of that, we may at some point get closer to about 3,000 in headcount, but that’s not for certain, it’s our expectation at this point. It may be higher or lower than that amount.”
“But it should not be assumed that those reductions would come from any particular company,” Kush added.
Currently, Ameritrade employs about 2,000 staff and TD Waterhouse USA employs about 2,400.
No decision has yet been made on how many branches the combined group will end up with, Kush said. In total, the two groups have 147 branches with the vast majority owned by TD Waterhouse USA.
TD Waterhouse was not immediately available for comment.
