NEW YORK (MarketWatch) --
E-Trade Financial Corp. shares rallied Monday after
the company said it would buy brokerage Harrisdirect
from BMO Financial Group for $700 million cash.
The move marks the latest in a consolidation
among brokerage firms that saw Ameritrade set plans
to buy TD Waterhouse in June.
"E-Trade is reacting to [its] failed
bid for Ameritrade by acquiring an alternative target,"
Fox-Pitt Kelton analyst David Trone said in a note
to clients Monday.
Trone said mergers in the industry may
not be over, and suggested that Ameritrade may one
day attempt to take over E-Trade.
Meanwhile, the Harrisdirect purchase
gives E-Trade "some time to at least bulk up, and
hopefully gain an equitable multiple in order to fend
off any hostile, or quasi-hostile action," Trone said.
Upon the deal's closing, Harrisdirect
will pay $50 million more to BMO Financial Group,
resulting in total proceeds of $750 million for the
Canadian seller, which expects a "modest" gain on
the sale.