- Today Charles Schwab announced it is buying TD Ameritrade for $26 billion in an all-stock deal. These are the details.
Charles Schwab has announced it is buying TD Ameritrade for $26 billion ($48.50 per share). This deal combines two of the largest discount brokerages in America. Together, the two financial giants have 24 million customer accounts and oversee $5 trillion in client assets.
The companies are expecting to generate $1.8 billion to $2 billion in ongoing cost savings and it should boost earnings per share by 10% to 15% in the third year once the deal closes. This deal is expected to close in the second half of next year.
This is an all-stock deal where Ameritrade shareholders will receive 1.0837 Schwab shares for every share they hold. This represents a 17% premium over the 30-day volume-weighted average price exchange ratio as of November 20, 2019.
“We have long respected TD Ameritrade since our early days pioneering the discount brokerage industry, and as a fellow advocate for investors and independent investment advisors. Together, we share a passion for breaking down barriers for investors and advisors through a combination of low cost, great service, and technology,” said Charles Schwab president & CEO Walt Bettinger. “With this transaction, we will capitalize on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys.”
The integration of the two companies is expected to take between 18 and 36 months following the close of the transaction. And Schwab has named Senior EVP and COO Joe Martinetto to oversee the integration initiative, assisted by a team of experts from both Schwab and TD Ameritrade. Bettinger, Boyle, and Schwab CFO Peter Crawford discussed the transaction in a conference call earlier today.
The corporate headquarters of the combined company will eventually relocate to Schwab’s new campus in Westlake, Texas. And both companies have a sizable presence in the Dallas-Fort Worth area. This will enable the combined company to take advantage of the central location of the new Schwab campus to serve as the hub of a network of Schwab branches and operations centers that span the entire U.S. and beyond. Going forward, any additional real estate decisions will be made over time as part of the integration process.
Over 40 years ago, Schwab and TD Ameritrade started out as alternatives to traditional Wall Street brokerages. And they became the preferred model for full-service investing among tens of millions of direct investors and the go-to providers of custodial and consulting services for thousands of independent investment advisors.
Schwab and TD Ameritrade are generated $17 billion in combined annual revenue and $8 billion in pre-tax profit. It is reported that their combined market capitalization could hit $90 billion.
The TD Ameritrade Board of Directors has suspended its previously disclosed CEO search and named TD Ameritrade EVP and CFO Stephen Boyle as the company’s interim President and CEO. Boyle will assume leadership of the company effective immediately, guiding its management team through its fiscal 2020 plan and the proposed integration with Schwab.
“Partnering with Schwab on this transformative opportunity makes the right strategic and financial sense for TD Ameritrade,” Boyle added. “We share a common history—a journey since 1975 that has made Wall Street more accessible and financial dreams more attainable for millions of Americans. Our associates are fiercely proud of that legacy and all that we have accomplished to make TD Ameritrade one of the premier firms in financial services. Now we look to join forces with a respected firm like Schwab that shares our relentless focus, and to do more than we could do apart. Together, we can deliver the ultimate client experience for retail investors and independent registered investment advisors. We can continue to challenge the status quo, pooling our resources and expertise to transform lives—and investing—and deliver sustainable, long-term value to our many stakeholders.”
This deal has been unanimously approved by the Boards of Directors of Schwab and TD Ameritrade as well as the Strategic Development Committee of TD Ameritrade’s Board—which is a committee comprised solely of outside independent directors that was established by the Board of Directors of TD Ameritrade to oversee and conduct the process and all negotiations concerning the transaction on behalf of the Board.
Following the closing, The Toronto-Dominion Bank (“TD Bank”) — which currently holds approximately 43% of TD Ameritrade’s common stock — will have an estimated aggregate ownership position of approximately 13% in the combined company with other TD Ameritrade stockholders and existing Schwab stockholders holding approximately 18% and 69%, respectively.
Credit Suisse Securities (USA) LLC served as financial advisor and Davis Polk & Wardwell LLP acted as legal advisor to The Charles Schwab Corporation. And PJT Partners LP and Sandler O’Neill + Partners LP served as financial advisors and Wachtell, Lipton, Rosen & Katz acted as legal advisor to the Strategic Development Committee of the Board of Directors of TD Ameritrade.
The deal is subject to customary closing conditions, including receipt of applicable regulatory approvals and approval by the stockholders of both companies.
