Schwab-Ameritrade Deal Gets Regulatory Nod, To Close Soon
Recently, the Board of Governors of the Federal Reserve System approved The Toronto-Dominion Bank TD for acquiring a minority, non-controlling interest in Charles Schwab SCHW, under Schwab’s proposed acquisition deal with TD Ameritrade AMTD. The all-stock deal was announced last November.
The Fed’s approval follows the closure of the investigation of the proposed acquisition by the Antitrust Division of the United States Department of Justice this June. Moreover, stockholders of both companies and regulators in international markets have approved the deal.
Therefore, with all necessary approvals of the proposed acquisition, both companies expect to close the transaction on Oct 6, subject to certain customary closing conditions.
Schwab President and CEO Walt Bettinger said, "We are very pleased with the Federal Reserve’s actions, which allow us to finalize our planned acquisition of TD Ameritrade. We are now focused on taking the last steps needed to close the transaction so that we can begin the important work of becoming one company and realizing the full potential of this combination on behalf of our clients."
Currently, for the customers of both firms, business operations would continue as usual. Notably, the completion of TD Ameritrade’s integration into Schwab is likely to take 18-36 months. Till then, both Schwab and TD Ameritrade will keep serving clients as separate broker-dealers. However, post the transaction’s closure, further information will be made available to clients.
Our Take
The online brokerage industry is undergoing massive operational upheavals. Last year, several leading players, with Schwab at the forefront, introduced commission-free trading with the aim to gain further market share. These brokerage firms, in fact, witnessed a significant rise in new accounts during the first half of 2020, as stock markets witnessed heightened volatility amid the coronavirus mayhem.
Following such disruptions, consolidation was expected in the industry. In February 2020, major investment bank Morgan Stanley MS inked a deal to acquire E*Trade Financial. The move is in sync with Morgan Stanley’s efforts to diversify revenues.
Remarkably, the Schwab-TD Ameritrade combination will create a behemoth in the online brokerage space, with combined client assets worth more than $5 trillion and serving nearly 24 million brokerage accounts. It is expected to result in substantial strategic benefits —earnings and cost synergies — for the combined entity.
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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
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TD Ameritrade Holding Corporation (AMTD) : Free Stock Analysis Report
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