Shakeout in the Online Trading Space

Omaha, Neb.-based Internet trading pioneer Ameritrade Holding Corp. is
acquiring the online trading arm of National Discount Brokers Corp., operator
of discount brokerage site, for about $154 million in common stock.

National Discount Brokers is an indirect subsidiary of Deutsche Bank AG,
which is exiting from the U.S. online brokerage business.

Ameritrade said the transaction is expected to be
“immediately accretive to earnings and cash flow upon closing,” adding
approximately $67 million in incremental revenue, 316,000 additional accounts
(a 20 percent increase), $300 million in margin balances and $6.3 billion in
client assets, a 24 percent increase.

Ameritrade also said it will gain about 9,000 trades per day, an 8 percent
increase. The deal also adds 401(k) accounts and an employee stock option
business to Ameritrade’s new Institutional Client Division.

The news sent Ameritrade stock up more than 5 percent in the first few
minutes of trading today to $6.22 after closing at $5.91 yesterday.

Online brokers have been struggling recently as the decline in Internet stock
values has sent many formerly active Web-based traders scurrying for the
exits. Ameritrade reorganized itself last June into two divisions — a private
client unit to deal with individual customers, including its traditional
online small investor, and an institutional client group to serve large
customers such as banks and hedge funds.

“This acquisition reflects our aggressive focus on growth and profitability,”
said Joe Moglia, chief executive officer of Ameritrade Holding. By maximizing
our operating leverage, we expect to increase our commission revenue, net
interest revenue and operating margins, and move toward our goal of being a
market leader in every client segment we serve…”

The transaction is anticipated to close in the fall. Depending on the market
price of Ameritrade common stock prior to the closing the number of shares to
be issued will be between approximately 21 million to 32 million.

Deutsche Bank said it would continue to focus on building out the strong
position of NDB Capital Markets Corp. The unit would hold a 10 percent to 14
percent stake in Ameritrade after the closing of the transaction.

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