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Discount broker going public
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April 30, 1999: 9:03 p.m. ET
Green Line, Waterhouse to sell $1B in IPO, form new combined company
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NEW YORK (CNNfn) - Discount brokerages Waterhouse Securities and Green Line announced plans to go public Friday in an offering that could raise as much as $1 billion.
The brokerages will form a new company called TD Waterhouse Securities Inc. based in New York. Waterhouse offers discount brokerage services in the United States while its sister firm, Green Line, provides the same services in Canada.
Only around 10 percent of the company will be offered to the market in the initial public offering. The rest of the shares will remain with the brokerages' current owner, Toronto-based TD Bank Financial Group, parent of Toronto-Dominion Bank.
TD Bank's Vice Chair of Wealth Management Stephen McDonald will retain his title and take over as CEO of the new company.
TD Waterhouse Securities Inc. said the proposed maximum value of the stock offering is $1 billion. It did not give the number of shares it would offer to the public or an offering price range in its filing with the Securities Exchange Commission.
Combined, U.S.-based Waterhouse and Canada-based Green Line reported net income of $48.7 million for its fiscal 1998, which ended last October. That came from $614.5 million in revenue, on a pro forma basis. The company said 59 percent of its average 110,000 trades per day are online trades.
TD Waterhouse Inc. said it will be the second-largest discount brokerage globally by customer accounts, with 2.6 million. It will be the third largest by trading volume and customer assets. On a full-time-equivalent basis, it employs 5,070 people, 69 percent of them in the United States.
At the end of the first quarter of 1999, the company said 780,000 of its customer accounts were wired for on-line trading. It captured 12 percent of the on-line market in the United States for the first quarter of 1999.
TD Bank, which first revealed its plan to sell off part of its discount brokerage in March, saw significant growth in those operations since it set up Green Line for online trading in 1992.
TD Bank founded Green Line Investor Services as a discount broker in 1984. It bought Waterhouse Securities Inc., an independently traded brokerage founded in 1979, in October 1996.
Waterhouse is the third-largest U.S. discount brokerage, behind Charles Schwab and E*Trade. Green Line operates in Canada, Australia, the United Kingdom and Hong Kong.
TD Waterhouse said its operations have seen particularly rapid growth in on-line trading in the last two years. Besides capitalizing on the boom in Internet stocks and anything.com, the TD Waterhouse stock offering will give the company cash for expansion. Advertising and marketing expense per new account was $63 in 1998, up from $59 in 1996.
The company plans to introduce a number of online improvements later this year. It wants to introduce Web service for investment advisers, with multiple accounts, block trading and trade allocation. TD Waterhouse also wants to offer Internet access in French for its Canadian customers.
Subject to review by the SEC, the company hopes the offering will take place by the end of July. Credit Suisse First Boston Corp. and TD Securities Inc. itself are the lead underwriters.
Goldman, Sachs & Co., subject of a government probe into IPO pricing and itself going public, is also underwriting the offering with Salomon Smith Barney Inc. and Morgan Stanley & Co.
The stock of TD Waterhouse Securities will be offered on both the New York and Toronto stock exchanges. No tickers have yet been set.
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