Toronto-Dominion Bank said Wednesday that it will go to market to finance an expansion of its global brokerage business.
The Canadian bank will pursue a limited public offering, representing roughly 10% of its far-flung international discount brokerage operation. Toronto-Dominion declined to discuss a possible market valuation, but analysts said the bank could raise more than $1 billion.
"This is our crown jewel," A. Charles Baillie, Toronto-Dominion's chairman and chief executive officer, said in a news conference Wednesday. "This is what we believe is going to differentiate us relative to our competition."
Toronto-Dominion's move shows how eager financial companies are to cash in on the soaring popularity of on-line investing. Just two weeks ago Donaldson, Lufkin & Jenrette Inc. announced plans to take part of its DLJdirect subsidiary public.
"Larger corporations are realizing they have significant value in their on-line brokerage subsidiaries," said Frank H. Lallos, a senior analyst with Gomez Advisors of Concord, Mass. "We wouldn't doubt that we'll see more of these."
Toronto-Dominion's announcement followed the bank's annual shareholders' meeting in Montreal.
Mr. Baillie said the Toronto-based bank would soon file a registration statement with the Securities and Exchange Commission. The bank would then create a holding company called TD Waterhouse Securities, he said. Waterhouse is the New York-based operation that Toronto-Dominion acquired in 1996.
Valuations of discount brokerage stocks have rocketed in recent months as more retail investors have begun trading on-line.
Since October, shares of Charles Schwab & Co., the brokerage that Toronto-Dominion has tried hardest to emulate, have rocketed from around $21.0625, to $89.
Toronto-Dominion has been weighing a public offering since January, and it is not alone. DLJ beat Toronto-Dominion to the punch last month, announcing plans to sell a new class of common stock to track the performance of the on-line business.
Fleet Financial Group of Boston had also made rumblings about pursuing a similar strategy for its SureTrade unit, before it announced plans in March to merge with BankBoston Corp.
The public offering will provide Toronto-Dominion with a "currency for acquisitions," Mr. Baillie said. He declined to outline any acquisition strategy while the stock offering is pending before the SEC.
But the bankdoes have an aggressive track record in brokerage acquisitions. Since 1996, Toronto-Dominion has acquired the U.S. brokerage operations of New York-based Waterhouse, as well as Kennedy Cabot and Jack White & Co., both of California.
The bank has also acquired brokerage operations in Hong Kong, Australia, and the United Kingdom. Including Toronto-Dominion's Canadian brokerage unit, Green Line Securities, the bank has 2.3 million customers around the world.
Aside from acquiring customer accounts, there are other costs to competing effectively in on-line brokerage, Mr. Baillie said.
"You can spend a lot more on technology and a lot more on advertising," he said.
Royal Bank of Canada, a peer of Toronto-Dominion, said Wednesday that it has completed its deal for Bull & Bear Securities, a U.S. on-line brokerage company with 25,000 customer accounts. The deal is valued at $6 million.
