E-Trade buys online brokerage for $700 million

E-Trade Financial Corp. has reached a definitive agreement to acquire the U.S.-based online brokerage operations of Harrisdirect from BMO Financial Group, a move to accelerate E-Trade’s growth and to increase available products and services to customers, E-Trade announced Monday in a statement.

The US$700 million all-cash transaction is expected to close by the end of the year, pending some customary regulatory approvals, according to E-Trade.

The deal would bring to E-Trade about 430,000 active customer accounts with about $32 billion in total assets, said Mitchell H. Caplan, E-Trade’s chief executive officer.

“Harrisdirect brings to our model a sophisticated and affluent customer base with growing levels of investable assets and a proven history of deploying those assets through multiple delivery channels,” Caplan said during a conference call to discuss the deal.

“With an average account balance of over $70,000, we believe the Harrisdirect customers possess a high propensity to engage in a broad suite of investing tools and cash management solutions,” he added. By comparison, E-Trade has about 3.64 million active accounts with an average account balance of $26,563.

Harrisdirect customers are also expected to add about 15,000 daily average revenue trades to E-Trade, Caplan said.

With the Harrisdirect integration, E-Trade customers are expected to benefit from expanded service offerings, broader access to institutional research, additional news services and a better IPO (initial public offering) platform, Caplan said. Meanwhile, Harrisdirect customers will gain access to a broader range of investment services, cash management tools and lending tools, Caplan said.

E-Trade will also build upon what it considers Harrisdirect’s particularly strong customer service to improve this area overall for all customers, he said.

Once the deal closes, E-Trade will have about 130,000 daily average revenue trades, over 4 million customer accounts, approximately $130 billion in customer assets and total customer cash and deposits of $24 billion, according to E-Trade. Moreover, on a full-year run rate basis, the deal is expected to generate $0.17 earnings per share in accretion, E-Trade said.