Online brokerage firm Etrade agreed to buy Telebanc Financial, a US Internet based bank, for approximately $1.8 billion on Tuesday.
The merger will take the form of a stock swap, in which Telebanc shareholders will receive 2.1 shares of Etrade common stock for each share of Telebanc's common stock, which has been valued at $93.45 per share. Once the merger is finalised, Telebanc shareholders will own approximately 13 per cent of Etrade's fully diluted common stock.
Both companies' boards of directors have approved the merger, which is expected to be complete by the third quarter, pending approval by regulators and shareholders.
Christos Cotsakos, Etrade's chairman and chief executive, said: "Traditionally, companies are focused on reengineering their legacy products and high cost distribution networks while defending their marketplace. This strategic emerger - the first to combine two ecommerce leaders - will enable us to deliver unparalleled value to consumers as we continue to expand and evolve an already rich set of investment, banking and cash management tools."
He added that the integration of both organisations' services would create a cost effective, scalable business model, while expanding its existing one million plus customer account base.
But James Punishill, an analyst at Forrester Research, disagreed. "It's a bad idea. This purchase simply distracts and wastes capital that could be put to better use," he said.
The two companies claim, however, that the merger will provide online consumers with first time access to FDIC insured Internet cash management accounts, including ATM access through the national Cirrus network, online bill payment and investing services, which will enable them to consolidate brokerage and banking accounts.
Telebanc is the holding company for Telebank, which provides online banking services, while Silicon Valley based Etrade provides online investing services and has a base of more than one million customers.
Source: VNU Newswire
Microsoft comes up with a new way to foist its unloved and little used Edge web browser on people
Facebook suspends Cambridge Analytica following weekend claims that it illegally harvested information from 50 million users
Insider claims Cambridge Analytica used academic app to filch Facebook data of 50 million users
Is the Samsung Galaxy S9+ worth its high price?