Ameritrade Holding has agreed to buy TD Waterhouse USA, which will make it the biggest online broker by trades.

Toronto-Dominion Bank, which owns Ameritrade, will receive a 32% stake in the combined company in a transaction that values the online brokerage at about $2.25 billion. Ameritrade will pay its own holders a $2.41 billion special dividend, or $6 a share, funded in part by Toronto-Dominion, the companies said in a statement yesterday.

Ameritrade, based in Omaha, Neb., made the purchase six weeks after spurning a takeover offer from E*Trade Financial. The acquisition will be at least the seventh by CEO Joseph Moglia, 56, since he took over in 2001. Rivals including Charles Schwab and Fidelity Investments have cut fees this year to gain market share in response to a slowdown in trading over the Internet.

“Ameritrade needed to add more trades to its pipeline,” said Matthew Fischer, an analyst at IRG Research Group in New York. “This helps them gain some scale. It had been losing customers prior to the deal, and their trade volumes had been deteriorating.”

Ameritrade had 402.4 million shares outstanding at the end of April, indicating the Canadian company will receive 189.4 million shares. Based on the current share price, which reflects the $6 dividend, that stake would be worth $3.38 billion. Toronto-Dominion won’t get the dividend.

“There is excess capacity in online brokerage right now, and there will be after this deal,” Mr. Moglia said in an interview. “The retail investor right now is more on the nervous side than not.”

Mr. Moglia will lead the new company, to be called TD Ameritrade.

Shares of Ameritrade rose $3.05, or 21%, to $17.87 in composite trading on the New York Stock Exchange. Toronto-Dominion gained 81 cents on the Toronto Stock Exchange to C$54.57.

The purchase will add to earnings within 12 months, the companies said. TD Bank Financial Group will also acquire Ameritrade’s Canadian brokerage operations for $60 million.

Assuming the two companies operated as a single entity for the 12 months ended March 2005, they would have had annual revenue of more than $1.8 billion and annual net income of $557 million, according to their joint statement.

On that basis, the companies would have had more than 3 million customers and client assets of about $219 billion.

“TD Ameritrade can now provide whatever the individual investor needs,” Mr. Moglia said during a conference call with investors. “Where we’re strong, we’re now going to be stronger.”

Toronto-Dominion CEO Edmund Clark, 57, is focusing on consumer banking after purchasing a 51% stake in Portland, Maine-based Banknorth Group in March for about $3.5 billion. It was Toronto-Dominion’s first foray into consumer banking in America.

Ameritrade last month cut its earnings forecast for fiscal 2005 as trading fell 14%. “We’re seeing lackluster market performance and feel retail investors are waiting for economic conditions to improve,” Mr. Moglia said in announcing the reduced estimate on May 13.

E*Trade made an unsuccessful bid for TD Waterhouse’s American business more than a year ago and then tried to buy Ameritrade. Ameritrade Chairman J. Joe Ricketts last month said the company wasn’t for sale.

“We are disappointed with the outcome,” said E*Trade spokeswoman Pam Erickson. “We still believe consolidation is important and we fully intend to be an active participant in future consolidation.”

TD Waterhouse’s 106,000 daily average trades in the three- month period ended April 30 would help Ameritrade surpass the 191,000 Schwab recorded in its first quarter, which ended March 31. Ameritrade customers made 167,200 trades a day on average in its most recent quarter, ended March 25. On a monthly basis, Ameritrade reached an all-time high of 254,000 average daily trades in January 2004.

“We don’t think this combination significantly changes the landscape for Schwab,” said Schwab spokeswoman Sarah Bulgatz. “We have broader and more sophisticated investment advice capabilities.”