TORONTO -- TD Waterhouse and U.S. online broker ETrade Financial have cancelled merger talks, saying they could not agree on terms. "Both companies agree that while there were potential benefits to concluding a transaction that merited serious discussion, they were unable to arrive at mutually agreeable terms," TD Bank, the parent of American brokerage TD Waterhouse, said last might.
The Canadian bank said last week it was discussing a "possible transaction," but provided no details.
The merger would have created the second-largest discount broker in the U.S.
It could also have given TD Bank a one-time asset windfall of as much as $2.2 billion -- the difference between the possible $3-billion valuation of its rumoured 40-per-cent stake in the merged company and the $800 million at which TD Waterhouse is currently valued on the bank's books.
TD Bank shares hit their highest level since early 2001 after the bank confirmed the ETrade merger talks, while stressing there was no guarantee anything would materialize.
A stock market slump and rising competition have hit the U.S. operations of TD Waterhouse hard and led to speculation the bank might sell it.
TD hired investment bank Goldman Sachs last year to examine strategic alternatives for the discount brokerage unit, fuelling speculation it could be auctioned off for as much as $1.5 billion US.
TD chief executive Ed Clark has said TD Waterhouse is a much-coveted property in Canada.
Charles Schwab, the founder and chairperson of Charles Schwab Corp., has said publicly he would "love" the opportunity to buy TD Waterhouse USA to bulk up his discount network.
ETrade is the larger of the two brokerage operations, with a market capitalization of $5 billion US. Its shares are widely held by American pension and mutual funds.
A combination of ETrade and TD Waterhouse would still be dwarfed by Charles Schwab in terms of customer assets. Analysts had suggested the deal would have also helped put TD in a favourable position if the Ottawa decides to allow bank mergers later this year.
