UPDATED: Making its second major acquisition in as many months,
E*Trade today said it will pay $1.6 billion in cash for J.P.
Morgan’s BrownCo online trading unit.
The deal will give E*Trade 200,000 new well-heeled customers who carry an
average balance of more than $145,000 — the second highest in the
industry, E*Trade said.
In a teleconference with financial analysts, E*Trade CEO Mitchell H. Caplan
said the company will continue pursuing acquisitions that add to its
earnings and bring down costs through increased scale.
E*Trade expects to gain $29 billion in assets, $3.4 billion in customer cash
and approximately 28,000 daily average revenue
trades from the acquisition. It figures that restructuring costs will be
approximately $60 million in 2006.
New York-based E*Trade hopes it can sell other financial services to these
news customers, including money market accounts, ATM services and mortgage
and home equity loans.
E*Trade’s buy follows its $700 million
purchase of Harrisdirect from BMO Financial Group in August.
Caplan said he expects the Harrisdirect deal to close in early October —
nearly a full quarter earlier than originally thought.
Combined, Harrisdirect and BrownCo will bring E*Trade an additional 630,000
accounts, Caplan said.
Today’s agreement also comes three months after its rival Ameritrade closed a deal for TD Waterhouse from Toronto-Dominion.
Ameritrade, which recently topped a
customer satisfaction survey, has also been aggressively acquiring online
trading and financial services companies. In 2002, it paid $1.29 billion for Datek.
The Internet boom gave birth to a slew of online brokerage companies.
However, mergers and acquisitions among online stock-trading firms have
picked up, as falling commissions have made trading volume a priority.