The brokerage industry is set for further consolidation, as Morgan Stanley has announced this Thursday that it will buy discount brokerage E*Trade Financial Corp (ETFC.O) in a deal worth around $13 billion.
The all-stock deal is the biggest transaction made by a Wall Street bank since the financial crisis and follows last year’s $26 billion all-stock purchase of TD Ameritrade by Charles Schwab.
Morgan Stanley will pay $58.74 a share in stock for E*Trade, at a premium of 30.7 percent to the last closing price of E*Trade shares. Under the agreement, shareholders of the discount brokerage will receive 1.0432 Morgan Stanley shares for each share.
Commenting on the acquisition, Mike Pizzi, Chief Executive Officer of E*TRADE said in the statement: “Since we created the digital brokerage category nearly 40 years ago, E*TRADE has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders, and stock plan administrators.”
“By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities. Bringing E*TRADE’s brand and offerings under the Morgan Stanley umbrella creates a truly exciting wealth management value proposition and enables our collective team to serve a far wider spectrum of clients.”
Acquisition to close in Q4 2020
The deal, which is expected to close in the fourth quarter, will provide a boost to the American multinational bank’s wealth management unit, which the firm’s CEO has been trying to bolster, by increasing the scale and breadth of the unit.
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Following the acquisition, the combined platforms will have $3.1 trillion client assets, 8.2 million retail client relationships and accounts, and 4.6 million stock plan participants.
“E*TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy,” added James Gorman, Chairman and CEO of Morgan Stanley in the statement.
“The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees.”
“E*TRADE’s products, innovation in technology, and established brand will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace. In addition, this continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasizing more durable sources of revenue.”
Under the agreement, the CEO of E*Trade will join Morgan Stanley and will continue to run the business from within the bank’s franchise. He will lead the ongoing integration effort and report to James Gorman. He will also join the Morgan Stanley Operating and Management Committee.