Charles Schwab Corp. agreed to buy TD Ameritrade Holding Corp. in a multibillion-dollar deal that will reshape the retail brokerage business.
Schwab agreed to acquire TD Ameritrade in an all-stock transaction the companies say is valued at $26 billion, or about $48.50 per share -- a 19% premium based on Schwab’s share price as of close on Nov. 20. TD Ameritrade stockholders will receive 1.0837 Schwab shares for each TD Ameritrade share.
The equity value of the deal is $28.3 billion based on Schwab’s closing price of $48.20 on Nov. 22.
Announcement of the deal comes after news of an acquisition broke on Thursday, sending up shares of both firms. Schwab, America’s original discount broker, will now have even more sway over the sector it pioneered nearly a half-century ago.
The tie-up creates a mega-firm with $5 trillion in assets -- a Goliath that may attract the attention of antitrust regulators, analysts say. Smaller brokerages like E*Trade Financial Corp. will have to contend with a much more formidable competitor.
Schwab shares fell 0.7% at 9:35 a.m. in New York trading. TD Ameritrade, the Omaha-based brokerage that’s partly owned by Toronto-Dominion Bank, rose 3.4%.
The combined firm will relocate its headquarters to to Schwab’s new campus in Westlake, Texas, according to Monday’s statement, though Schwab’s San Francisco operations will remain a sizable hub.
TD Bank, which holds 43% of TD Ameritrade, will own roughly 13% of the new business. Its voting stake will be limited to 9.9%, with the rest of its position in a non-voting class of stock. The Canadian lender will have two new seats on the combined firm’s board, while TD Ameritrade will name a single director.
As a result of the deal, Schwab will see its business add 12 million client accounts, $1.3 trillion in assets, and roughly $5 billion a year in revenue.
Walt Bettinger, Schwab’s chief executive officer, said in the statement that the new firm will have “the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys.”