Ameritrade Holdings Corp. jumped from the No. 3 online brokerage in terms of daily transactions to the market leader yesterday with its acquisition of rival brokerage Datek Online Holdings Corp. The deal, worth $1.29 billion in stock, puts Ameritrade ahead of E*Trade Group Inc. and Charles Schwab Corp.
Datek Online, based in Jersey City, NJ, and owned by a group of private-equity firms, gains a 50 percent stake in the new company. Ameritrade plans to issue 216 million shares to fund the acquisition. The deal is expected to close in 90 days.
The newly combined company will have 2.7 million accounts, $43 billion in assets, annual revenue of $800 million and facilitate 164,000 trades per day. It will operate under the Ameritrade brand and have 15 percent of the market by accounts and 27 percent by online trading activity, analysts said. In terms of assets, however, the new company represents only 5 percent of the market.
The deal continues a consolidation in the online brokerage industry that was accelerated last year with the collapse of the dot-com market and the prolonged decline of the U.S. equity markets.
Analysts said the acquisition bolsters Ameritrade's presence in the industry, which has been diminishing from consolidation, a faltering economy and its diminished marketing.
“Ameritrade, increasingly mindful of its limited cash resources given the current market environment and the relative degree of saturation in the U.S. online brokerage industry, has reduced its marketing expenditures meaningfully,” said Michael Vincinquerra, an analyst with Raymond James & Associates. “The firm has shifted from a national mass media branding effort to a more targeted approach.”
Ameritrade, Omaha, NE, began a multichannel marketing campaign in February with a television spot featuring a bull and a bear exchanging banter about market conditions. The campaign, which also included online ads, direct mail, print and e-mail, is in keeping with the brokerage's track record of using humor to promote its brand.
The Internet represents 30 percent to 50 percent of Ameritrade's overall marketing efforts. Direct mail accounts for about 10 percent. Ameritrade used several different-sized banner ads and e-mail in its recent campaign.
Datek Online was among the first brokerages to use rich media advertising. In June 2000, Point Roll, Philadelphia, introduced a multiple advertiser unit called the Top-Roll ad on iWon.com's promotions portal. One of the Top Roll ads featured online brokerages Datek Online, Waterhouse Group Inc., Brown & Company Securities Corp. and Brokerage America.