E-Trade’s Bid for Rival Is Rejected

E-Trade Financial Corp. on Thursday unveiled terms of a bid to buy rival discount stock broker Ameritrade Holding Corp., including $1.5 billion in cash and a 47.5% stake for Ameritrade shareholders in the combined company.

Ameritrade’s board said it rejected the offer.

“The proposed deal represents immediate value creation for shareholders” of both companies, E-Trade Chief Executive Mitchell Caplan said in a statement.

Ameritrade Chairman J. Joe Ricketts, whose family owns about 30% of the stock, said the company he founded was “not for sale.”

Ameritrade shares surged as much as 24% on Monday after New York-based E-Trade offered to buy the company. Consolidation proposals follow a price war this year as firms including Fidelity Investments cut commissions to gain market share.

“It’s looking less likely that we will get a deal,” said David Trone, a financial services analyst at Fox-Pitt Kelton Inc. Fox-Pitt has a “neutral” recommendation on the stock and doesn’t do business with Ameritrade.

Ameritrade directors met Wednesday and supported the firm’s growth strategy, the company said. Shares of Omaha-based Ameritrade rose 4 cents to $13.80 on Nasdaq, putting its market value at almost $5.6 billion. E-Trade fell 34 cents to $12.04 on the New York Stock Exchange.

Ameritrade was founded by Ricketts in 1975, when the U.S. brokerage industry was deregulated. The company offered touch-tone telephone trading in 1988 and made its push into online trading in 1996.

E-Trade, then based in Menlo Park, Calif., went public the same year. Under former Chief Executive Christos Cotsakos, E-Trade branched out into businesses including banking, automated cash machines and mortgages.