Toronto-Dominion Bank is expanding its U.S. footprint with a deal to buy Albert Fried & Co., a boutique Wall Street broker-dealer with a history that stretches back nearly a century.
TD said the acquisition will drive the growth of its U.S. securities division with additional services that include self-clearing, securities lending and, most important, a prime brokerage technology platform that TD can complete and use as the groundwork for growth. A prime brokerage offers a number of financial services to sophisticated institutional investors, particularly hedge funds.
“This acquisition really enforces our our commitment to our targeted U.S. growth strategy,” David Santina, managing director of equities at TD Securities in the United States, said in an interview. “Developing and integrating the prime brokerage platform really fills a niche and it will further enhance our capabilities.”
He expects the platform will be complete and fully operational in 2017, when it will appeal to a cross-section of hedge fund clients, marking a new venture into the United States for TD.
Mr. Santina did not disclose growth targets. But he said that the U.S. prime brokerage market is substantially larger than the Canadian market.
TD would not comment on the size of the deal because it is pending regulatory approval. However, Albert Fried & Co.’s 2015 annual report indicates that the privately held firm’s book value is about $80-million (U.S.), which implies a price tag of $120-million if it sold for 1.5 times book value.
The announcement follows suggestions from TD in recent weeks that it has been looking at acquisitions, as the lender focuses on opportunities that can deliver strong growth in a relatively weak economy.
Bharat Masrani, TD’s chief executive officer, said during a discussion at the Scotiabank Financials Summit last week that the lender was open to deals on both sides of the border.
“We will look at any acquisition in Canada very seriously because there are not many that are ever available,” Mr. Masrani said, adding: “And we would also look at tuck-ins in the southeast of the U.S., if they are available.”
Peter Routledge, an analyst at National Bank Financial, said that the deal for Albert Fried & Co. fits with TD because its large retail banking operations are generating steady income that exceeds what is needed to support organic growth.
“In short, we think TD has more than enough balance sheet capacity to get more ambitious in its capital markets operations,” Mr. Routledge said in a note.
He added: “Given the headwinds faced by its personal and commercial banking platforms in Canada and the U.S., the bank may find no other growth strategy with as compelling a risk-return profile as this business.”
Glenn Gibson, vice-chair of TD Securities U.S., believes TD has an advantage over larger and more established U.S. players, in that the Canadian bank is not encumbered by legacy infrastructure that can make it difficult to adapt to new regulations.
“We’re able to grow our business within the confines of the current regulatory environment,” he said, adding that TD’s large U.S. retail operations and massive balance sheet also help.
Albert Fried & Co. LLC is a Wall Street brokerage, founded in 1919, that specializes in trading technology and services. Its institutional clients range from small hedge funds to large pension funds in the United States and abroad, but the firm also serves high-net-worth individuals.
Albert Fried Jr. took over the firm in 1955 and, at 85, still serves as CEO.
On June 1, the U.S. Securities and Exchange Commission charged the firm with failing to sufficiently evaluate or monitor trading for suspicious activity. The SEC said, for example, that customers trading in a specific security on a given day exceeded 80 per cent of the overall market volume.
Albert Fried & Co. paid a $300,000 penalty to settle the charges.Report Typo/Error