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SYDNEY - Australia and New Zealand Banking Group (ANZ), moving to boost its position in the lucrative online share trading market, has offered to buy the rest of online broker E*Trade Australia for A$268 million ($304.5 million).
Shares in E*Trade jumped 12.2 per cent to A$4.15 on the news, their biggest single-day percentage gain in four months and above ANZ's offer price of A$4.05 per share. ANZ shares climbed 2 per cent to A$29.87.
Analysts say online brokers are keeping pace with the rapid growth in total share market trading in Australia, though they account for only about 15 per cent of market share.
E*Trade is Australia's sixth-largest overall broker by trading volumes, and has benefited from a four-year bull run in markets that attracted more investors to equity markets.
However, analysts suggested the offer by Australia's third-largest lender bank undervalued the franchise by 10 per cent, and the rise in E*Trade shares above the bid price suggested investors are looking for a higher offer.
ANZ's offer for the remaining 65.8 per cent in E*Trade it does not already own values the entire company at around A$407 million, and represents a 9.5 per cent premium to E*Trade's Friday's close.
"We believe widespread acceptance will be unlikely given the conservative value implied by the bid on both a relative and absolute valuation basis," Deutsche Bank analysts Douglas Farrell and Neil Watson said.
E*Trade accounts for about 5 per cent of the total trading volume on the Australian Stock Exchange, which averaged 179,000 trades a day in January, up about 50 per cent on a year earlier as the market hit several highs.
"We think E*Trade is the future of stock broking and it fits very well with our strategy. It's a convenient and simple way for people to trade," Brian Hartzer, group managing director personal division at ANZ, told a media conference.
Independent directors of E*Trade had recommended the offer, ANZ said in a statement.
At the offer price of A$4.05, E*Trade trades at price-to-earnings ratio of about 14.5, based on Deutsche Bank earnings per share estimates. However, ANZ said when adjusted for a recently resolved tax dispute, the deal was being set on a PE ratio of 22.5.
E*Trade's main competitor is Commonwealth Securities, a unit of Commonwealth Bank of Australia - the nation's second-biggest lender.
E*Trade did 318,000 trades in December, ranking sixth in the overall market. In value terms, it did A$4.07 billion. Leader Commsec executed 652,412 trades worth A$7.7 billion.
Deutsche Bank, Macquarie Bank, Credit Suisse and Goldman Sachs JBWere, which offer traditional and electronic broking business, also rank above E*Trade in business volume.
ANZ customers account for about a third of E*Trade's customer base.
Last month the broker forecast a 15-20 per cent increase in first-half net profit before tax.
- REUTERS
