Morgan Stanley will acquire financial services company E*TRADE in an all-stock transaction valued at $13bn.
E*TRADE stockholders will receive 1.0432 Morgan Stanley shares for each E*TRADE share.
What does the E*TRADE deal mean?
The deal boosts Morgan Stanley in the wealth management sector. E*TRADE holds over 5.2 million client accounts, $360bn retail client assets. These will be added to Morgan Stanley’s three million client relationships and $2.7trn in assets.
Shareholders from both companies are expected to benefit from cost savings of around $400m from maximising efficiency in infrastructure. Furthermore, there is scope for funding synergies of $150m by optimising E*TRADE’s $56bn in deposits.
Mike Pizzi, CEO of E*TRADE, will join the bank and continue to run the firm within the Morgan Stanley brand. He will report to chairman and CEO of Morgan Stanley James Gorman.
In addition, he will join the Morgan Stanley Operating and Management Committees. One of E*TRADE’s independent directors will also join the Morgan Stanley Board.
“E*TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy. The combination adds an iconic brand in the direct-to-consumer channel to our leading adviser-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees. E*TRADE’s products, innovation in technology, and established brand will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace,” said Gorman.
“In addition, this continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasising more durable sources of revenue.”
“Since we created the digital brokerage category nearly 40 years ago, E*TRADE has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders, and stock plan administrators,” added Pizzi.
“By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities. Bringing E*TRADE’s brand and offerings under the Morgan Stanley umbrella creates a truly exciting wealth management value proposition and enables our collective team to serve a far wider spectrum of clients.”
The deal is subject to customary closing conditions including regulatory approval. It is expected to complete in Q4 2020.
This is the second high scale deal in the US in recent months. Schwab was looking at a $26bn deal for TD Ameritrade in November 2019.