E*Trade Concedes In Citadel Battle

Aug 9 2011 | 1:23pm ET

Citadel Investment Group and E*Trade Financial have reached something of a ceasefire.

E*Trade, in which Citadel is the largest shareholder, has agreed to consider a sale on the hedge fund's terms. In exchange, Citadel said it would shelve its fights to have two directors thrown off the company's board of directors and to force a special shareholder meeting.

"We trust this new process, involving all directors, will be more transparent and objective, and look forward to the board and its adviser, Goldman Sachs & Company, working quickly to fulfill this crucial mandate," Citadel wrote in a letter to E*Trade.

The hiring of Goldman—and firing of JPMorgan Chase—was crucial to the cooling of tensions between both sides, as the bank was Citadel's preferred adviser. Also important was Citadel's agreement to set up a committee made of three independent directors to evaluate strategic alternatives; board entrenchment has been a frequent bone of contention for Citadel, whose founder, Kenneth Griffin, sits on the company's board himself.

The special committee will be composed exclusively of directors who joined the board over the last three years.

E*Trade also agreed to consider another of Citadel's demands—changing its board structure—at its regularly scheduled annual meeting last year.


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