TD Ameritrade to Acquire Scottrade

October 24, 2016 08:42 AM

TD Ameritrade and Scottrade Monday morning announced that TDA would acquire Scottrade in a cash and stock transaction valued at $4 billion.

According to the announcement, the transaction combines two highly complementary organizations with long histories of helping millions of people invest in their financial futures. For TD Ameritrade, the transaction adds significant scale to its retail business, extends its leadership in trading, and more than quadruples the size of its branch network.

The company expects to realize approximately $450 million in combined annual expense synergies, and more than $300 million in additional longer-term opportunities. The first 25% of the expense synergies are expected to be realized in Year 1 post-close and the remainder realized in Year 2. Furthermore, the transaction is expected to generate double-digit EPS accretion post-conversion. 

 

Terms of the Deal 

The transaction, which has been approved by the boards of directors of TD Ameritrade, TD Bank Group (TD) and Scottrade, will take place in two, concurrent steps. First, TD will purchase Scottrade Bank from Scottrade Financial Services, Inc. for $1.3 billion in cash consideration. Under the terms of the proposed acquisition, Scottrade Bank will merge with and into TD Bank, N.A., an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. Additionally, TD will purchase $400 million in new common equity (11 million shares) from TD Ameritrade in connection with the proposed transaction, pursuant to its preemptive rights.

Then, immediately following that acquisition, TD Ameritrade will acquire Scottrade Financial Services, Inc., for $4 billion, or $2.7 billion net of the proceeds from the sale of Scottrade Bank.

The $2.7 billion will be comprised of:

  • $1.0 billion in new common equity (28 million shares) issued to Scottrade shareholders; and
  • $1.7 billion in cash, which includes TD Ameritrade cash ($900 million), a new debt offering ($400 million), and the proceeds from the sale of 11 million shares to TD ($400 million). 

 

Impact on Growth Strategy 

With more than 3 million client accounts and $170 billion in assets under management, Scottrade represents a unique opportunity to acquire scale and an audience of retail investors that will benefit from TD Ameritrade’s broader service offering, which includes:

  • Deeper investor education solutions
  • Sophisticated trading platforms and advanced mobile trading technology
  • Access to more diverse products, like complex options, futures and foreign exchange
  • Access to more investment guidance and advice solutions, like goal planning services, “robo”
  • advice, and the company’s Amerivest managed portfolios.

“For more than 40 years, TD Ameritrade has been committed to breaking down the barriers that stand between American investors and the financial market. That means delivering an investing experience grounded in technology and innovation that educates and enables investors with all levels of ability and wealth to work toward their financial goals,” said Tim Hockey, TD Ameritrade president and chief executive officer. “We’ve found in Scottrade a partner with an equally-strong passion and a proven track record for delivering exceptional client experiences. This combination will allow us to leverage our strengths and increase our scale, further accelerate our asset gathering capabilities and introduce our award-winning line-up of trading tools, products and education services to millions of new investors.” 

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