US online trading consolidation continues with TD close to $4 billion Scottrade deal

TD Ameritrade Holding Corp. and its largest stakeholder, Toronto-Dominion Bank, are close to a deal to buy online brokerage Scottrade Financial Services Inc. for $4 billion.

TD Ameritrade would acquire Scottrade’s brokerage operations for about $2.7 billion in cash and stock, while Toronto-Dominion would purchase Scottrade’s banking operations for $1.3 billion in cash, according to people familiar with the matter. The takeover may be announced as soon as Monday before markets open in North America.

The transaction would combine two of the largest online brokerages, an industry under pressure from lower trading volumes and sluggish revenue growth.

The acquisition of Scottrade extends a flurry of consolidation in the industry. In a $725 million cash deal last month, E*Trade Financial Corp. (NASDAQ:ETFC) bought Aperture New Holdings Inc., parent company of the futures and options trading platform OptionsHouse. Meanwhile, Ally Financial Inc. bought TradeKing Group Inc. for about $275 million in June.

TD Ameritrade was created in January 2006, when the former Ameritrade Holding Corp. bought Toronto-Dominion’s U.S. network of independent advisers, TD Waterhouse. In exchange, the bank received a large stake in the combined firm.

The companies have maintained close business ties. Last year, Tim Hockey left the Toronto-based lender, where he ran Canadian banking and wealth management, and became TD Ameritrade’s CEO.

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