E*Trade Australia has promised up to 40 percent of its equity to the ANZ Bank in exchange for access to ANZ’s four million customers.
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.
ANZ will commit to a “significant marketing investment” and will get a seat
on the E*Trade Australia board, but E*Trade will be left to conduct the
trading operations by itself.
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.
