E*Trade Australia Sells Equity to ANZ
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The alliance gives ANZ, which is one of the four large banks which dominate the Australian financial industry, great incentive to help E*Trade's marketing effort by tying their stock entitlements to the level of interest in E*Trade shown by ANZ customers.
In a complex deal, ANZ will be issued with 6 million shares totalling 10 percent of E*Trade Australia immediately. Once ANZ customers account for more than 10 percent of E*Trade Australia's transactions, additional shares will be issued to ANZ every six months in accordance with an agreed formula. This would be equivalent to a further 25 percent of the enlarged capital in total, over a total period of three years, according to the companies.
Additionally, ANZ will receive a further 5 percent stake if the six months at the end of those three years sees ANZ customers delivering in excess of two-thirds of E*Trade Australia's transactions, and have the option to buy 4 million extra shares.
The deal still has to be approved by shareholders at the AGM in August, but its main backers are already happy.
The largest existing shareholder of E*Trade Australia -- RG Capital Multimedia, which has 29 percent -- and Australian software vendor Computershare, which is entitled to 15 percent of the company, both praised the deal as "innovative" and delivering "phenomenal market reach."
E*Trade said the deal was part of its aim to become the market leader, which is currently Commonwealth Securities, a cut price broker which is run by another of the four big banks, the Commonwealth.
The site of E*Trade also trails the popularity of independent online brokers Sanford Securities, InvestorWeb, Egoli, and WebLink, and lags behind all of the big four bank except ANZ, according to this week's edition of the Where Did We Go ranking of Australian sites.
"This alliance gives us tremendous economies of scale and critical mass which, combined with E*Trade's dominant brand position and leading-edge technology, places us in a strong position to achieve our mission of becoming the leading branded provider of online financial services in Australia and New Zealand," said Malcolm Spry, chairman of E*Trade Australia.