Two hedge funds exerting pressure on TD Ameritrade Holding Corp. seem pleased with the company's decision this week to change who is involved in preliminary merger discussions, but the move may not fully satisfy the funds.
In a statement Tuesday, the hedge funds said Ameritrade took "a significant first step toward removing the harmful influence" of Toronto-Dominion Bank when it decided to remove representatives of both its largest shareholders, Toronto-Dominion and the Ricketts family, from its mergers and acquisitions committee.
But the funds, Jana Partners and SAC Capital Advisors, said the directors who remain on the mergers committee must be free to explore possible deals "without improper influence by Toronto-Dominion CEO W. Edmund Clark or other Toronto-Dominion Board designees," according to a letter the funds sent to TD Ameritrade.
Toronto-Dominion owns about 40% of TD Ameritrade as a result of Ameritrade's acquisition of the bank's U.S. retail securities business, TD Waterhouse USA. The second-largest Ameritrade shareholder is the family of company founder and board chairman Joe Ricketts, which controls about 21% of the stock. The hedge funds, which claim to own 8.4% of Ameritrade shares together, have been urging the Omaha brokerage to join forces with a major competitor such as E-Trade Financial Corp.
But the funds have said they believed Toronto-Dominion would oppose such a deal because it would lose strategic benefits. Toronto-Dominion officials have denied any conflict of interest.
TD Ameritrade spokeswoman Katrina Becker said Monday that the move to reorganize the mergers and acquisitions board with three members was "a straightforward, transparent action so that if there happened to be any perception of influence, that that was eliminated."
Before Monday, the M&A committee was made up of five board members: three outside independent directors; Wilbur Prezzano, a representative of Toronto-Dominion Bank; and Robert Slezak, a representative of the Ricketts family. Neither Mr. Prezzano and Mr. Slezak is on the newly reorganized board.
The funds said they plan to review the situation and contact the independent directors on the merger committee to suggest strategic options.
