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Canada Bank to Pay $100 Million for Jack White

Acquisitions: Deal would be third purchase of a major Southland discount brokerage in less than a year.


In what would be the third purchase of a major Southern California discount brokerage firm in less than a year, Canada's fifth-largest bank said Tuesday it would pay about $100 million for Jack White & Co., the San Diego discounter.

Toronto Dominion Bank said Jack White will operate as a division of its discount brokerage arm, Waterhouse Investor Services Inc. The San Diego company's founder, Jack K. White, will become chairman of the new division, which will keep the Jack White name.

The deal is the latest in a series of acquisitions of discount brokers by banks, which are scrambling to position themselves as dominant players in the financial-services industry.

When completed, the acquisition will significantly expand Toronto Dominion's presence in the discount brokerage business as well as in California. In October, the bank purchased Kennedy, Cabot & Co., the Beverly Hills discounter, for about $155 million.

"The addition of Jack White to our discount brokerage family builds on Toronto Dominion's position as a leading force in this business," said Duncan Gibson, a vice chairman at the Toronto-based bank.

Founded in 1973 by Ohio native Jack White, the firm has about $12 billion in assets under management, 135,000 active customers and is the nation's fifth-largest discount broker. It has about 450 employees.

By comparison, discount brokerage leader Charles Schwab & Co. has $345 billion in customer assets. Fidelity Investments' brokerage arm has $147 billion in customer assets.

"A lot of people have been knocking on our door, but we feel comfortable with this one," said White, 63. "We just needed a big partner in order to go global and address the changes in the industry."

Discount brokerage firms such as Schwab charge lower commissions to buy and sell stocks than do full-service firms.

Although the banking industry's diversification strategy may be successful, one analyst is concerned that the rich prices being paid could mean trouble for these deals in the long run.

"The problem here is that the banks are buying at the top of the market. The equity markets don't get much better than this," said Brock Vanderliet, an analyst with Keefe, Bruyette & Woods in New York. "If the market tanks--that's the major risk."

Jack White became the first discounter to allow its customers to trade no-load mutual funds without commissions. The firm also has a large network of fee-only financial advisors as customers.

"The current services we offer--such as the no-load mutual funds--should continue unaffected," said Peter Mangan, executive vice president in charge of mutual funds at Jack White. "We expect to achieve some efficiencies through this and offer even more services."

In August, Mellon Bank of Pittsburgh said it would buy Los Angeles discounter Pacific Brokerage Services Inc. for an estimated $140 million.

The Jack White deal is subject to regulatory approval and is expected to be completed by June.

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