- Charles Schwab officially announced a $US26 billion deal to buy TD Ameritrade, combining two of America’s largest discount brokerages.
- The combined group will boast 24 million customer accounts and handle more than $US5 trillion in client assets.
- Schwab expects the tie-up to generate $US1.8 billion to $US2 billion in ongoing cost savings, and boost earnings per share by 10% to 15% in the third year after the deal closes.
- Watch Charles Schwab and TD Ameritrade trade live.
The all-stock deal will see Ameritrade shareholders receive 1.0837 Schwab shares for every share they hold. Assuming regulators approve the merger, Schwab expects it to close in the second half of next year.
The combined group will boast 24 million customer accounts and handle more than $US5 trillion in client assets. Schwab anticipates about $US1.8 billion to $US2 billion in cost savings, representing around 18% to 20% of the pair’s combined cost base. It expects the tie-up to boost EPS by 10% to 15% in the third year after the deal closes.
“We have long respected TD Ameritrade since our early days pioneering the discount brokerage industry,” Walt Bettinger, Schwab’s president and CEO, said in a press release. “With this transaction, we will capitalise on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution.”
The discount brokerage industry is in a state of flux as Schwab, Ameritrade, Fidelity, and others have slashed commission fees on trades in recent months. Together, Schwab and Ameritrade generate a combined $US17 billion in annual revenue and $US8 billion in pre-tax profits, and their combined market capitalisation could approach $US90 billion, putting them in a powerful competitive position.