May 9 (Bloomberg) -- Shares of Ameritrade Holding Corp., the fourth-largest independent discount broker by assets, rose after the New York Times reported that rival E*Trade Financial Corp. offered to buy the company for more than $5.5 billion.

Ameritrade shares surged $2.89, or 26 percent to $14.20 in 8:30 a.m. trading on the Inet ATS trading system before U.S. stock exchanges opened. E*Trade shares advanced 97 cents, or 8.1 percent, to $12.90.

Shares of E*Trade gained the most in more than two years on May 6 amid speculation that it was contemplating a merger with Ameritrade. The Times reported earlier today that E*Trade made its unsolicited offer for Ameritrade in a letter to the company's board. The Wall Street Journal also reported that E*Trade sent a letter to Ameritrade's board.

``At this point, it does not appear that the offer has been publicized, which is typically done in a bear hug in an effort to put pressure'' on Ameritrade's management ``and board by generating target shareholder interest,'' Fox-Pitt Kelton analyst David Trone wrote in a note to clients today.

Trone estimated that New York-based E*Trade, the third- largest independent discount broker, could pay $15 a share in an all-stock takeover of Omaha, Nebraska-based Ameritrade. That would represent a 33 percent premium to Ameritrade's May 6 closing price.

Market Values

E*Trade's market value on that date was $4.4 billion. Ameritrade's was $4.55 billion. Analysts said a merged company might fetch a market value of $12 billion to $14 billion because of cost-cutting and growth opportunities, according to the Journal report.

Ameritrade, E*Trade and other discount brokerages including San Francisco-based Charles Schwab Corp., the biggest discount broker, have cut fees and commissions this year in a battle for market share.

E*Trade said last month that first-quarter net income rose 4 percent to $92 million, or 24 cents a share, from the same period a year earlier. Ameritrade said in April that fiscal second- quarter net income fell 12 percent to $71 million, or 17 cents a share.

The reports of a possible combination follow the New York Stock Exchange's plans disclosed two weeks ago to merge with Archipelago Holdings Inc., an electronic securities market. Two days later, Nasdaq Stock Market Inc. agreed to buy Instinet Group Inc. for $1.8 billion, combining the two largest electronic markets for U.S. equities.

``There's been a lot of consolidation in that industry, with the NYSE and Archipelago, and Nasdaq and Instinet,'' said Evan P. Olsen, head trader at Stephens Inc. in Little Rock, Arkansas.

Trip Cancelled

Talk about a potential deal began last week after officials at New York-based E*Trade canceled a trip to Europe to meet investors, said Richard H. Repetto, an analyst at Sandler O'Neill & Partners LP. ``There was speculation that E*Trade management had to turn its attention to a merger rather than complete the European roadshow,'' he said May 6.

Ameritrade has also been holding talks about buying discount brokerage TD Waterhouse Group Inc., the New York Times reported today.

To contact the reporter on this story: Steve Dickson in New York at sdickson1@bloomberg.net.

Last Updated: May 9, 2005 08:41 EDT