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Datek could fetch $1.4 billion
Bids for the broker due Wednesday; winner won't be known for some time.
March 19, 2002: 6:09 PM EST

NEW YORK (CNN/Money) - Bids for Datek Online Holdings Corp. are due by Wednesday and the broker could fetch as much as $1.4 billion, sources familiar with the negotiations told CNN/Money.

Several companies have made offers for Datek, including rivals E*Trade Group Inc., TD Waterhouse and Ameritrade, sources said. But a winner will not be announced for several days or possibly a couple of weeks, a different source familiar with the auction said.

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Jersey City, N.J.-based Datek, the nation's fourth-largest online broker in terms of trading volume, competes against E*Trade, Charles Schwab Corp. (SCH: Research, Estimates) and TD Waterhouse (TWE: Research, Estimates). Datek has more than 800,000 online accounts.

Datek's private investors have shopped the firm as a way to cash out. An investor group led by Bain Capital paid $700 million in December 2000 to buy a majority stake in Datek Online. At the same time, privately-held Datek spun off its popular electronic trading network, Island ECN.

In February, CNN/Money reported that Datek was looking for a buyer.

Ameritrade is now seen as the most likely buyer, but the online broker lacks the cash or currency to make a high bid. However, Omaha, Neb.-based Ameritrade would make the best fit for Datek, analysts said.

"Ameritrade doesn't own a market maker and they are very focused on trading," one analyst said, who declined to speak for the record. "Their overall philosophy is very closely aligned with Datek."

An E*Trade buy would present conflicts since the Menlo Park, Calif.-based online trader already has a market maker. However E*Trade has more cash and its shares, which closed Tuesday at $10, are trading nearly 33 percent higher. Ameritrade (AMTD: Research, Estimates) finished at $6.75 Tuesday.

"If Datek really wants liquidity then they would most likely favor E*Trade," said analyst Justin Hughes, of Robertson Stephens.

Datek, TD Waterhouse, and Ameritrade declined to comment. Bain Capital declined comment as well. E*Trade could not be reached for comment.  Top of page


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