TOPLINE
Brokerage giant Charles Schwab announced on Thursday that it had received antitrust approval from the U.S. Department of Justice for its acquisition of rival broker TD Ameritrade, a blockbuster $26 billion deal which further consolidates the industry.
Schwab’s stock is up 2% on the news, while TD shares surged 5%.
Mark Lennihan/ASSOCIATED PRESS
KEY FACTS
The DOJ closed its investigation and approved the merger between Charles Schwab and TD Ameritrade which further consolidates the brokerage world.
The $26 billion deal between the two largest publicly traded discount brokers will create a brokerage mammoth with more than $5 trillion in client assets ($3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade).
Both stocks jumped on Thursday: Schwab was up 2% while TD Ameritrade shares jumped over 5%.
The merger was first announced in November 2019, shortly after Schwab slashed trading fees to zero in a move that sparked a price war and caused other major brokerages to quickly follow suit.
The deal intensifies the already heated competition in the brokerage industry amid lower prices for investment products.
Another rival online broker, E-Trade Financial, sold itself to Morgan Stanley in February: The $13 billion deal was approved by the DOJ in March.
Crucial quote
“We’re gratified by the DOJ’s decision and appreciate its diligent and thorough review. We are pleased to be clearing an important milestone in our planned acquisition of TD Ameritrade,” said Schwab CEO Walt Bettinger in a press release.
What to watch for
The shareholders of both companies are scheduled to vote on the transaction later on Thursday, according to Schwab’s press release. The deal is expected to be finalized in the second half of 2020, with integration of the two companies likely to take between 18 and 36 months, Schwab said.
Key background
Schwab and TD’s merger came after major brokerages became embroiled in a price war by slashing trading fees to zero—a move that is good for customers but bad for brokers who give up billions of dollars of revenue. The all-stock deal between the two largest discount brokers will help save costs and improve profitability in the zero-commission environment, Schwab says.
Further reading
Here’s What The Charles Schwab And TD Ameritrade Merger Will Mean For Shareholders (Forbes)
Charles Schwab In Talks To Buy TD Ameritrade, Create Brokerage Giant: Report (Forbes)
E-Trade Shares Surge 24% After Morgan Stanley Announces $13 Billion Purchase (Forbes)