Breaking News
Investing Pro 0

TD Ameritrade to buy Scottrade in two-step deal with TD Bank

Stock Markets Oct 24, 2016 12:06PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. A Scottrade branch is seen in New York
 
ETFC
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AMTD
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TD
-0.72%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ALLY
-4.09%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Matt Scuffham

(Reuters) - Toronto-Dominion Bank (TO:TD) and TD Ameritrade (O:AMTD) are buying Scottrade Financial Services for $4 billion in a deal that will combine two of the biggest U.S. discount brokerages, the companies said on Monday.

TD Ameritrade, the largest U.S. discount brokerage by trade executions, said it would pay $2.7 billion for Scottrade's brokerage business. Toronto-Dominion Bank, TD's largest shareholder, is acquiring Scottrade Bank for $1.3 billion in a deal that will expand its U.S. operations.

The purchase of Scottrade by TD Ameritrade, which is subject to approval by U.S. regulators, will produce a combined business with around 10 million client accounts and $1 trillion in assets, which will execute around 600,000 trades per day.

It is the latest in a wave of consolidation among discount brokerages, which are facing weak trading volumes and slow revenue growth as wealth managers cut fees amid intense competition. E*Trade Financial Corp (O:ETFC), another discount broker, said in July that it would buy online brokerage OptionsHouse for $725 million while Ally Financial Inc (N:ALLY) purchased TradeKing Group for about $275 million a month earlier.

TD Ameritrade CEO Tim Hockey said the deal will leave the combined business well-placed to compete and respond if a price war over commissions accelerates.

"“We certainly believe the regulators will look fairly at this deal and will opine," he said in an interview. "I still think this is a considerably competitive marketplace, that’s for sure. There are lots of opportunities for additional competitors to get into our space and continue to drive price competition."

Hockey said TD Ameritrade will look at further deals which "make strategic and financial sense" in addition to Scottrade.

TD Ameritrade, 42-percent owned by Toronto Dominion Bank, said it expected to make annual cost savings of $450 million as a result of the deal, with another $300 million of potential savings identified in the longer term.

As part of those plans, Hockey said around 25 percent of the combined business's 600 branches will be closed. TD Ameritrade currently has 100 branches while Scottrade has 500. Hockey said in the interview the combined workforce of 10,000 will be reduced by about 20 percent.

"Once we've identified where there are overlaps in current locations we expect to settle at around 450," he said.

The $2.7 billion TD Ameritrade is paying for Scottrade's brokerage business comprises $1 billion in new common TD Ameritrade shares and $1.7 billion in cash.

Rodger Riney, the founder, chief executive officer and controlling shareholder of St. Louis-based Scottrade, will join TD Ameritrade's board after the deal closes, the companies said.

The companies expect the deal to close by Sept. 30.

TD Bank has been expanding aggressively in the United States, growing both its retail and investment banking divisions as it looks to diversify from its home market. It has already grown to be one of the 10 biggest banks in the United States and has a major retail presence with 1,300 branches.

CIBC analyst Robert Sedran questioned whether TD would have purchased Scottrade Bank were it not to help facilitate the transaction for Ameritrade.

"We do not believe TD would have pursued Scottrade Bank as a standalone acquisition," he said.

Shares in TD were up 0.35 percent with TD Ameritrade down 2.9 percent in mid-morning trade.

TD Ameritrade to buy Scottrade in two-step deal with TD Bank
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email