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TD Ameritrade CEO Says Firm Continues To Talk To Rivals

CNBC.com
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The chief executive on TD Ameritrade told CNBC on Wednesday that he couldn't comment on recent merger speculation but said the company continues to talk to competitors, as disclosed in a regulatory filing submitted several weeks ago.

"Several weeks ago we filed in our own 8-K, we said we talk to our competitors on a very regular basis; we have done that all along and we continue to do that," said Ameritrade CEO Joe Moglia, in a phone interview on CNBC's Street Signs.

TD Ameritrade shares gained following reports published Wednesday that said the online broker has been discussing a possible combination with rival E-Trade Financial.

The talks have been ongoing for weeks and currently are focused on making sure both companies agree on strategy, but the companies aren't yet close to a deal, The Wall Street Journal reported on Wednesday, citing people familiar with the matter.

TD Ameritrade shares rose more than 2% and advanced as much as 5% in intraday trading, while E-Trade shares declined slightly after seeing earlier gains of 3%.

Moglia declined to comment further on merger speculation, saying the company remains focused on long-term opportunities.

"If indeed we were in discussions with E-Trade, or anyone else for that matter, we would not be able to talk about that," said Moglia. "This is not about announcing a deal and getting a pop in the stock. If there is an opportunity for our investors in the long term, that would be something we would try and figure out."

An Ameritrade spokeswoman told the Journal, "We have talked and continue to talk to peers in the industry."

The companies previously have discussed an alliance but never reached a deal. This time, however, there is the added pressure of two hedge funds with big stakes in Ameritrade that have publicly urged the two companies to talk.

Jana Partners and S.A.C. Capital Advisors, which claim to collectively own 8.4% of Ameritrade shares, have been urging Ameritrade to join forces with a major competitor such as E-Trade or Charles Schwab in the interests of the majority of shareholders.

They say Ameritrade's largest shareholder, Toronto-Dominion Bank , has undermined merger talks because it might diminish the bank's roughly 40 percent stake in Ameritrade.

Toronto-Dominion officials have denied any conflict of interest.

On Wednesday morning, the New York Times on its Dealbook web site reported on Wednesday morning that sources close to the companies had told it that no deal was imminent and that the barriers that had prevented a deal previously were still in place.

Analysts from UBS and Banc of America Securities said they thought that the barriers to a deal actually taking place were high.

UBS wrote that the hurdles include E-Trade's credit and mortgage issues related to the mortgage market, different strategies, crowded boards and demanding shareholders, and controlling management teams.

Banc of America wrote that while a deal makes sense in terms of saving expenses, important issues such as who would run the company, how Ameritrade would continue to shift its strategy toward more fee revenue, and credit quality will "ultimately prevent a deal."

Recent turbulence in credit markets has added to the issues the Journal said were under review, with E-Trade last week hit by concerns over the quality of its mortgage portfolio.

Shares of E-Trade fell as much as 28% last Thursday, but recovered on Friday after the company reassured investors about the credit quality of its mortgage holdings.

As of the end of June, E-Trade counted 4.7 million brokerage and banking accounts, compared with 6.3 million such accounts at TD Ameritrade, and 6.9 million at the Charles Schwab, the Journal reported. In contrast, Merrill Lynch has more than 7 million customer accounts.