Schwab Corporation (NYSE: SCHW) announced on Monday it has agreed to acquire TD Ameritrade (NASDAQ: AMTD) for an all-stock transaction valued at USD 26 Billion.
Under the agreement, TD Ameritrade shareholders will receive 1.0837 Schwab shares for each TD Ameritrade share, representing a 17% premium over the 30-day volume weighted average price as of November 20.
TD Ameritrade shares were up 3.8%, while Schwab shares were down 0.6% on Monday morning during pre-market hours.
“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,” said Schwab President and Chief Executive Officer Walt Bettinger.
“Together, we share a passion for breaking down barriers for investors and advisors through a combination of low cost, great service and technology. 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,” continued Bettinger.
The acquisition allows Schwab to add further scale on top of its organic growth, helping drive sustainable, profitable growth and long-term value creation.
The combined firm is expected to serve 24 million client accounts with more than USD 5 Trillion in client assets. Together, the two firms recently generated a total annualized revenue and pre-tax profits of approximately USD 17 Billion and USD 8 Billion, respectively.
The transaction is expected to be 10%-15% accretive to GAAP eps AND 15% to 20% accretive to operating cash EPS in year three, post-close.
Along with the acquisition announcement, TD Ameritrade Board of Directors has suspended its previously disclosed Chief Executive Officer search, naming Stephen Boyle, TD Ameritrade EVP and Chief Financial Officer, as the Company’s interim President and Chief Executive Officer. Boyle will assume the role effectively immediately.
“Partnering with Schwab on this transformative opportunity makes the right strategic and financial sense for TD Ameritrade,” Boyle said. “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.”
The transaction is expected to close in the second half of 2020.