Merger Activity Off To Fresh Start

ThinkorSwim Group (SWIM, $8.34, up $2.69) was acquired by TD Ameritrade (AMTD, $13.40, down $0.08) yesterday in a sign that could signal more M&A activity is on the way. We have already seen the wave of mergers that the government has arranged between the banks but this deal was done because TD new it had a jewel.

In November, TD posted earnings of $0.29 a share versus $0.27 cents a year ago as net income rose to nearly $20 million. Revenue jumped 10% to a record $98 million from $89 million as 58% came from the brokerage segment. That may not look like much but considering the environment and the fact that the company beat earnings by eight cents tells us that SWIM has managed to hold its own.

The real numbers are SWIM’s customer assets hit a new record of $3 billion with $1.7 billion in cash and money market funds. The firm’s total accounts nearly doubled from the year ago quarter as the online brokerage firm is becoming very popular among investors, institutional traders and money managers. Business is booming and this deal ramps up TD’s plans to grow its options business which has been booming lately.

The deal is worth $600 million and SWIM shareholders will receive $3.34 in cash and 0.4 shares of TD for every share they hold of SWIM. The deal values SWIM shares at $8.70 a share based on TD’s closing price of $13.40. Too late for an option trade but it was nice to see the January 7.50 calls (UKHAU, $0.95, up $0.90) jump 1800%.

Rick Rouse
Rick@OptionsMentoring.com

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