The deal will give E*Trade an additional four million customer accounts and about $130bn in customer assets, as well as $24bn in cash and deposits. It will also increase the firm’s daily average revenue trades (DARTs) by 13%, making a daily average of 130,000.
With the acquisition of Harrisdirect, we take a strategic step in further evolving our franchise, said Mitchell Caplan, CEO of E*Trade. We accelerate our growth goals by extending our asset gathering strategy and fully leveraging customer cash, order flow and borrowing relationships across our integrated platform.
The move to buy Harrisdirect comes two months after E*Trade made an unsolicited bid for Ameritrade, which responded by saying it was not for sale. Ameritrade itself recently bought trading firm TD Waterhouse USA, highlighting a continued effort of consolidation in the industry as online trading builds up its presence.
Although Harrisdirect is not thought to be profitable, E*Trade claims the transaction will generate $186m in savings, of which $72m would come from additional revenue and $114m from cost cuts. Harrisdirect should also bring in 17 cents a share once it has been fully integrated.
The bank of Montreal is said to have offloaded its Harrisdirect unit because it did not want to bear the cost of more capital that would have been needed in order for the business to expand and remain competitive in the current environment.
