TD Ameritrade to Acquire Thinkorswim for $606 Million

(By Salman - iStockAnalyst Writer)Online brokerage firm TD Ameritrade Holding Corp. (NASDAQ: AMTD) announced on Thursday that it will acquire Thinkorswim Group Inc. in a cash and stock deal worth $606 million.

According to the terms of the deal shareholders of Thinkorswim will get $3.34 in cash and 0.398 shares of TD Ameritrade (NASDAQ: AMTD) for every share of Thinkorswim they own. Based on TD Ameritrade's Wednesday closing price of $13.48, values thinkorswim shares at about $8.71 per share, at a premium of about 54% from latter's Wednesday closing price of $5.65.

The acquisition is expected to be completed within the next six months. President and Chief Executive Officer Fred Tomczyk said in a statement "This transaction is directly aligned with our growth strategy, creating scale for the trading side of our business and, more importantly, advancing our trading strategy by several years."

TD Ameritrade said that it will retain Thinkorswim founders Tom Sosnoff and Scott Sheridan. The company added that Chief Executive Lee Barba will have "an active role" through the transition. “The thinkorswim team is very talented, and their innovative approach has led to outstanding achievements in technology and education. Together, we will extend our leadership in the industry with a best-in-class platform for traders, investors and registered investment advisors," the Ameritrade statement read.

Lee Barba, CEO of Thinkorswim commented “We are excited about this transaction with TD AMERITRADE, as it will provide a premium to our current share price for our shareholders and access to a wider range of Web and software-based trading and education technology for our clients. It is also an opportunity for our employees to contribute to accelerated growth at TD AMERITRADE. We believe this combination will enhance the Company’s leadership position in the investment services industry by providing the kind of highly compelling trading technology and education-based services that investors demand in today’s rapidly moving markets.”

TD Ameritrade said that the acquisition is likely to boost fiscal 2010 profit by 3% to 7%. It expects a 10% to 15% earnings in the year after the acquisition is completed, including the benefit of the share repurchases. To company also intends to issue approximately 28 million shares of stock for the deal.

TD AMERITRADE is the current industry leader in the number of equity trades placed each day, and Thinkorswim currently leads the industry in retail options trades placed each day.

Analysts on average are currently looking for earnings of $1.22 a share for fiscal 2010.

Merrill Lynch & Co is advising TD Ameritrade on the transaction. Paragon Capital Partners LLC is advising Thinkorswim.

Shares of TD Ameritrade fell 57 cents or 4.23% to $12.91.

Disclosure: Author does not own any of the stocks discussed here.


Source: istockanalyst.com