SAN FRANCISCO -- E-Trade Financial Corp. is exploring a deal that reportedly would combine its online stock brokerage with rival TD Waterhouse and open the door to a more affluent group of customers.
If E-Trade and TD Waterhouse unite, the combined operations might leapfrog Charles Schwab Corp. to become the largest online stock broker. As of Sept. 30, Schwab had 4 million active online brokerage accounts. Together, E-Trade and TD Waterhouse would have more than 6 million customer accounts.
Neither New York-based E-Trade nor TD Waterhouse's Toronto-based parent, TD Bank Financial Group, would provide details about the negotiations. The companies confirmed the talks after The Globe and Mail in Toronto reported E-Trade and TD Waterhouse are discussing a merger.
If a deal is completed, E-Trade probably would be the acquirer and run the combined operations, said industry analyst Richard Repetto of Sandler O'Neill & Partners. He estimated E-Trade would have to pay $3.4 billion to $5.1 billion for TD Waterhouse.
A June 1999 initial public offering of TD Waterhouse's stock valued the brokerage at $9 billion, or $24 per share. TD Waterhouse's market value had plunged to $3.2 billion by the time TD Bank bought back the publicly traded shares for $9.50 apiece in a November 2001 deal that took the brokerage private.
E-Trade's shares gained 36 cents to close at $13.78 yesterday on the New York Stock Exchange.
TD Waterhouse has been an acquisition target since its parent company hired investment bankers to explore options for the brokerage's US operations. Other suitors have included Schwab and Ameritrade Holding Corp.