Toronto-Dominion Bank got mixed reviews Thursday on Wall Street for its offer to buy back the publicly traded shares of TD Waterhouse Group Inc.
Analysts were split on whether the $9 offer announced late Wednesday for the 12% of shares outstanding was fair to the outside shareholders of the discount brokerage. Robert Sobhani of Banc of America Securities Inc. said it was. But Richard H. Repetto of Putnam Lovell Securities Inc. pointed out that the buyback, during a market downturn, will mean a considerable loss to TD Waterhouse investors.
Though the price is reasonable in the current market, Mr. Repetto wrote in a note to investors, this "may not be the fairest of deals."
"They sold at a high and buy at a low," he said in a telephone interview Thursday.
Mr. Repetto said Wednesday's announcement came as a surprise to him. The possibility of a buyback "has certainly been a topic of conversation" with TD Waterhouse management, he said, but he had been unaware of concrete plans.
Indeed, Stephen D. McDonald, TD Waterhouse's chief executive officer, had told investors in April at a conference sponsored by Putnam Lovell that the rationale for trading TD Waterhouse stock publicly was to have a currency for acquisitions in the United States.
"It is likely that TD Bank will hold to this" strategy, Mr. McDonald said at the time.
But on Thursday, Kym Robertson, a Toronto-Dominion spokeswoman, said the company is now taking a different view of TD Waterhouse.
Ms. Robertson said Toronto-Dominion wants to expand its asset management unit by leveraging TD Waterhouse's customer base - and believes that owning all of the brokerage can help.
The decision may not mean an end to Toronto-Dominion's acquisition plans in the United States, Ms. Robertson said. "TD has a record of being opportunistic, and that has not changed," she said.
They buyback announcement echoed one seven months earlier from Credit Suisse First Boston. On March 26 the Credit Suisse Group unit said it would buy up the publicly traded stock of its online brokerage unit, CSFBdirect, for $4 per share. It completed the purchase of the 18 million shares on Aug. 22, but only after raising its offer to $6 per share.
Toronto-Dominion will probably not raise its offer, said Mr. Sobhani, the Banc of America Securities analyst. "The stock never gathered much trading volume," he said, and the $9 offer "makes sense."
The Toronto-Dominion offer "is priced fairly at 23.1 times [TD Waterhouse's projected] 2002 cash operating earnings per share," he noted.
On Thursday, TD Waterhouse stock rose 16%, to $9.28. The American Banker index of 225 banks rose 1.39% and the Standard & Poor's 500 index 1.52%.
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