Magazine article American Banker

E-Trade's Acquisition of Telebanc Approved after Holder Cuts Stake

Magazine article American Banker

E-Trade's Acquisition of Telebanc Approved after Holder Cuts Stake

Article excerpt

WASHINGTON -

After gaining government approval Tuesday, E-Trade Group Inc. plans to close its $1.1 billion deal for Telebanc Financial Corp. today or later this week.

The merger brings together E-Trade Securities Inc., the on-line brokerage with $30 billion of assets in more than 1.5 million customer accounts, and Telebank, a branchless thrift with $2 billion of deposits held by 100,000 customers. The thrift will be renamed E-Trade Bank and continue as a national low-cost marketer of retail banking services.

The Office of Thrift Supervision withheld its approval until one of E-Trade's owners diluted its stake.

The agency's overriding concern was that 25% of E-Trade had been owned by Softbank America Inc., an Internet holding company that also owns pieces of Yahoo Inc. and E-Loan Inc. Any shareholder of a thrift holding company that owns 25% or more is considered to have conclusive control and must itself apply to be a thrift holding company.

The Telebank deal, however, would dilute Softbank's stake in E-Trade to just below 25%, according to E-Trade spokesman Patrick Di Chiro. Softbank is a Newton Center, Mass., subsidiary of Softbank Corp. of Tokyo. "Softbank did not have to sell any shares," he said.

Menlo Park, Calif.-based E-Trade's stock fell 4.7% Tuesday, closing at $26.6875. Arlington, Va.-based Telebanc's stock was flat, at $27.8175. The deal, announced in June, was approved by shareholders Dec. 29.

The OTS plans to keep a close eye on the new E-Trade Bank, requiring its top executives to update regulators every quarter on "financial performance, business strategies, and any new activities," according to the order. …

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