Ameritrade to buy Datek, making it No. 1 Web trader

Online dealer will pick up a million new customers

April 09, 2002|By BLOOMBERG NEWS

OMAHA, Neb. - Ameritrade Holding Corp. agreed yesterday to buy Datek Online Holdings Corp. for $1.3 billion in stock, surpassing Charles Schwab Corp. as the biggest handler of Web stock trades for individual investors.

Acquiring Datek gives the Omaha brokerage almost 1 million new customer accounts, vaulting it over Schwab and E*Trade Group Inc. in rankings of online brokers by trading volume.

Schwab still dwarfs Ameritrade in customer assets and client accounts, measures some analysts say are more important than trading. The price Ameritrade paid per account is two-thirds higher than it paid for its last acquisition.

The sale "redraws the map of the industry," said Stephen G. Pagliuca, a managing director at Bain Capital Inc., one of the buyout firms that sold Datek and will own half of Ameritrade. "We really consider this an investment in the industry leader with all the benefits that come with that."

Datek is the latest brokerage to be sold after a more than 50 percent drop in online trading by individual investors in the past two years. The decline hurt profits and forced Internet brokerage firms to combine, slash jobs and reduce expenses.

The owners of Datek - including Bain, TA Associates, Silver Lake Partners, Advent International and France's Groupe Arnault - have almost doubled their investment since they bought Datek for $700 million in December 2000.

Datek, based in Jersey City, N.J., would increase Ameritrade's client assets by about a third to $43 billion. Ameritrade's shares have plunged 89 percent from their peak April 14, 1999. The stock rose 12 cents yesterday to close at $6.42 in trading of 3.1 million shares, more than quadruple the three-month daily average.

"Ameritrade's purchase helps it gain order flow and clients at a time that isn't great," said Peter Barkow, an analyst at HSBC Trinkaus & Burkhardt in Dusseldorf, Germany.

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