Broker-dealer TradeKing is being acquired by financial services holding company Ally Financial (NYSE:ALLY). The deal is valued at $275 million which represents a $250 million premium on top of the value of the acquired net assets. The transaction is expected to close in the third quarter of 2016.
TradeKing’s business includes a wealth management unit which is the primary focus of Ally financial. Aside from the unit, the holding company will also receive an online broker/dealer, which recently acquired the client assets of multi-asset brokerage MB Trading back in August last year. Subsequently the broker-dealer dropped the foreign exchange dealing license of the firm, channeling client trades in FX to GAIN Capital as its introducing broker.
The deal also includes TradeKing’s digital portfolio management platform, and the firm’s educational content and social collaboration channels. The Financial Industry Regulatory Authority (FINRA) is yet to approve the deal, with an additional clearance pending compliance with the Hart-Scott-Rodino Antitrust Improvements Act.
The addition of wealth management is the next key step in Ally’s digital product evolution
Commenting on the announcement the CEO of Ally Financial, Jeffrey Brown said: “The addition of wealth management is the next key step in Ally’s digital product evolution and will create a powerful combination of segment-leading direct banking and innovative investment services in a single integrated customer experience.”
Ally appears to be keen to join the broader trend in the financial industry, where the biggest innovations are stemming from smaller companies such as TradeKing.
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“The trend toward digitally-based financial services continues to gain momentum with consumers in general, and we see even greater opportunities ahead as the millennial generation begins to require a broader selection of financial products, including wealth management. We see strong alignment between Ally’s loyal and digitally-savvy customer base and TradeKing’s innovative, client-centric business,” Brown continued.
According to Ally Financial’s projections, the TradeKing acquisition is unlikely to have material impact on the results of the company in 2016 and 2017 due to the costs related to the transaction. The consumer push toward digitalization of financial services appears to be the driver for the deal.
TradeKing has approximately $4.5 billion worth of client assets, which included about $1.1 billion of cash and cash investments, with 260,000 funded accounts and 20,000 average daily average revenue trades (DARTs).
The CEO of the bank unit of Ally financial, Diane Morais elaborated: “We look forward to welcoming the TradeKing team to the Ally family as we aim to deliver additional products and services to our combined set of customers under the Ally brand, which is a recognized leader in digital financial services.”
“Ally has a loyal and growing base of customers who have a need for wealth management services and continually ask us to expand our offering. We also believe there is an opportunity to offer TradeKing clients competitive deposit products that can enhance their overall savings strategies, and we are optimistic about the future potential of the franchise we are building,” she added.
Back in 2013, TradeKing acquired the securities business of GAIN Capital, with the latter later handling the foreign exchange business of TradeKing.