E*Trade in talks to buy Ameritrade - WSJ

E*Trade in talks to buy Ameritrade - WSJ

Online broker E*Trade has made an unsolicited bid of over $5.5 billion for rival discount broker Ameritrade, according to a report by the Wall Street Journal.

Citing executives familiar with the matter, the report says New York-based E*Trade sent a letter to the board of Ameritrade last week indicating the price that it would be willing to pay for the company.

Shares in both firms surged on Friday on the bid speculation, with E*Trade stock rising 8.45% to close at $11.93. Shares in Ameritrade jumped 5.3% during the day to close at $11.31, valuing the firm at $4.55bn.

Rumours of a merger took hold on Friday after E*Trade cancelled meetings with investors in Europe. Analysts have forecast that a combination could be valued by investors at $12bn to $14bn.

Weak margins and sluggish volume growth have fuelled speculation about further consolidation in the online broker sector.

According to a New York Times report, Ameritrade is reputedly holding secret talks to buy TD Waterhouse which is owned by Toronto-Dominion Bank. E*Trade abandoned sale talks with TD Waterhouse in January last year after the two companies failed to agree terms over control of the combined entity.

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