TD AMERITRADE (AMTD): S.A.C. & JANA Outline Benefits For Merger Pressure

Stock Tickers: AMTD, ETFC, SCHW, IBKR

S.A.C. and JANA have issued a response to TD AMERITRADE’s (AMTD-NASDAQ) noting that this was not necessarily the best time to pursue a combination.  Of course they are in disagreement, with an 8% stake bet you could have guessed that.  They have what is actually a 21 page presentation plan you can read through for the full details.  It is admittedly a detailed plan, but many would still question this.

Here are some of the synergies in an E*TRADE (ETFC-NASDAQ) combination:

Cost synergies of $600 million;
Revenue synergies $100 million;
Expected cost Increase $108 million;
Claims single to double-digit EPS growth in 2008 & 2009;
Could be 100% stock or 75% stock and 25% cash.

Here are some of the Synergies outlined in a Charles Schwab (SCHW-NASDAQ) merger:

Cost synergies of $550 million;
Revenue synergies $450 million;
Expected cost Increase $220 million;
Claims double-digit EPS growth in 2008 & 2009;
Could be 100% stock or 50/50 stock/cash, although more concerns on this potential.

Here is the FULL PRESENTATION.  The questions behind the motivation behind this are numerous.  Obviously the first and foremost answer is to make money on the stock.  But this does not seem as straight forward as other merger proposals on the reasoning behind this, and it feels like very premature ‘activist investor’ activity.  There have been so many mergers that led up to the point where these companies are now that making a super-merger of online discount trading firms may be horrible for the trading consumer.  The truth is that this would probably not be noticed immediately, but this would leave customers with far fewer choices for a wide spectrum online and discount trading platform.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.