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Ameritrade Holding Corp. announced yesterday that it will be purchasing its rival TD Waterhouse USA in an all stock transaction from Toronto-Dominion Bank.

"We expect that it will create significant value for shareholders by generating substantial cost synergies and deliver a more diverse revenue mix by shifting to an asset-gathering model," said Ameritrade CEO Joe Moglia. "This exciting combination builds upon Ameritrade's strong track record as a leading industry consolidator and creates an even more robust platform for future consolidation and growth."

The deal is worth about $2.9 billion, and the company said that it expects the acquisition to be accretive within twelve months and expects to realize about $578 million of annualized gross synergies, including cost savings and increased revenue opportunities, within six quarters after the closing. As Reuters says,

The deal follows weeks of speculation about consolidation in the sector and raises questions over the next move of rival E*Trade Financial Corp., which had pursued its own bid for Ameritrade.

But analysts said E*Trade faces an uphill battle, particularly with a large chunk of Ameritrade controlled by the company's founding Ricketts family.

"While nothing precludes E*Trade from pursuing Ameritrade with another offer, we believe the economics of trumping the current offer are far less attractive," said Jason Bilodeau with UBS Investment Research.

"The acquisition of TD Waterhouse U.S.A. is the right deal for Ameritrade. This opportunity accelerates our long-term investor strategy with access to branches and advice, while maintaining an industry leading pre-tax margin," said Mr. Moglia.

The two companies expect the deal to be closed in about six months. It is still subject to approval by shareholders of Ameritrade, as well as regulatory approvals in the U.S. and Canada.

Chris is a staff writer for WebProNews. Visit WebProNews for the latest ebusiness news.