Charles Schwab Corp. is nearing a deal to buy TD Ameritrade Holding Corp, according to a person familiar with the matter, reshaping a beleaguered online brokerage sector that’s seen fierce competition from new entrants amid price pressure and alternative ways to invest for clients.
TD Ameritrade jumped about 17% at 9:39 a.m. in New York trading, the most since 2008. Shares of Schwab were up 8.1%.
A transaction could be announced as early as Thursday, the person said, asking not to be identified because discussions are private.
Schwab’s purchase would create a $5 trillion titan that would be better positioned to weather the challenges facing today’s brokerages, which include price conscious customers and a low interest rate environment.
A deal between the two companies “would expand Schwab’s roster of active traders and solidify its leading position serving independent advisers,” wrote David Ritter, an analyst at Bloomberg Intelligence, in a note on Thursday.
The deal would be worth $26 billion, Fox Business reported earlier, citing unidentified people familiar with the situation.
An acquisition would come at a time of transition for TD Ameritrade. The Omaha-based brokerage said in a surprise announcement in July that Chief Executive Officer Tim Hockey would leave no later than the end of February 2020, rekindling questions of whether it would pursue a deal. Hockey denied that his departure had anything to do with M&A at the time.
It would be the second time Schwab has made a radical move in the space of two months, after it announced zero fees for trades last month.
The move to eliminate commissions swept away a revenue stream and rekindled speculation that online brokerages might have to cut deals to survive the increased industry pressure. TD Ameritrade relied more on commissions than some competitors, drawing 36% of its net revenue from commissions in 2018, compared to 7% at Schwab.
The companies didn’t immediately respond to emails and phone calls seeking comment.