Discount brokerage TD Ameritrade is all set to be acquired by Charles Schwab in an all-stock deal worth $26 billion, according to an agreement Ameritrade stockholders will get 1.0837 worth of Schwab stock for each of their shares. It reflects a 17% premium over the Ameritrade stock’s 30-day average before the announcement. Reports suggest that the deal could be closed at some point in the second half of next year.
Throughout Thursday and Friday last week, the Charles Schwab stock rose by 8%, and TD Ameritrade’s stock recorded gains of 16%. The proposed merger between two of the biggest discount brokers in the United States will create a behemoth. The merged entity will have total assets to the tune of $5 trillion and serve as many as 24 million clients.
Walter Bettinger, CEO and President of Charles Schwab, said,
We believe the combination of our two great companies positions us to be competing and winning in the investment services business for the long run — the very long run.
Once the merger is completed, 69% of the company is going to be owned by Schwab shareholders, while Ameritrade shareholders will own 18%. That being said, the entire integration process post-approval will take 18 to 36 months.
According to estimates, the cost of integration is going to be around $1.6 billion. The company will be headquartered in Westlake, Texas, where Schwab has established its new campus. It will create one of the largest entities in wealth management and brokerage service. However, it remains to be seen whether the deal passes regulatory scrutiny or not.