Ameritrade Holdings Corp. closed its $2.9 billion purchase of Toronto-Dominion Bank’s TD Waterhouse unit on Wednesday and reported a 2% increase in its fiscal first-quarter earnings; the quarter ended on Dec. 31, before the deal’s completion.
Net income at the Omaha online discount brokerage company reached $86 million on revenues of $277.3 million, which were up 5.8% from the year earlier. Earnings per share were 22 cents. Ameritrade said daily average revenue trades in the quarter were 156,000 and that it opened 61,000 accounts.
Ameritrade’s earnings were in line with analysts’ expectations, excluding a $12 million charge for liquidating its investment in Knight Capital Group Inc.
The company closed its deal for TD Waterhouse Group and said it would now take the name TD Ameritrade Holding Corp. It declared a $6 special dividend to shareholders before the deal’s closing.
Ameritrade announced in June it had agreed to buy the U.S. online brokerage unit of the Canadian banking company.
Joe Moglia, Ameritrade’s chief executive officer, said during a conference call that it would close two of its five call centers and 40 of 140 branch offices acquired in the deal. Call centers in Omaha, Fort Worth, and San Diego will remain open; those in Jersey City and Yorkview, Canada, will be shut. The remaining 100 branch offices will have about 530 employees, he said, but he did not know how many jobs would be lost in the branch closings.
To complete the deal, Ameritrade gave Toronto-Dominion 196.3 million shares of Ameritrade stock and $20,000 in cash. This leaves the Toronto bank with a 32.6% stake in TD Ameritrade and makes it the new company’s largest shareholder.
TD Bank Financial said in a press release Wednesday that, with the deal completed, it will exercise its right in the deal agreement to buy an additional 7.3% of TD Ameritrade’s outstanding shares for a minimum of $16 per share.
Ameritrade’s stock price fell 25.4%, to $19.02 a share, in Wednesday morning trading on the Nasdaq exchange on the news that the special dividend had been paid and 196.3 million new shares had been issued. The deal agreement limits the bank to a 39.9% stake in TD Ameritrade for the first three years and no more than 45% for up to 10 years. The Nebraska company increased its revenue expectation from the deal by $100 million and now forecasts revenue and cost synergies totaling $678 million.
It also raised earnings targets for the current fiscal year. It said it expects to earn 22 cents to 28 cents in the second quarter, 20 cents to 26 cents in the third, 19 cents to 25 cents in the fourth, and 82 cents to $1 for the fiscal year.
