New Agreement Set with Charles Schwab and TD Ameritrade for All-Stock Transaction, Worth $26 Billion

  • Charles Schwab doesn’t plan to offer cryptocurrency trading, though TD Ameritrade already does through CME Group.
  • TD Ameritrade will bring 12 million client accounts with the acquisition.

Charles Schwab, known in the United States for work as an investment brokerage company, has decided to add a little more power to its efforts. According to reports by The Block, the firm recently set up an acquisition for TD Ameritrade, worth $26 billion. The transaction is being performed entirely in stock.

The acquisition was announced on Monday by Schwab, stating that the newly combined company will be in charge of managing over $5 trillion in assets for clients, as it serves 24 million client accounts. Of that amount, the addition of TD Ameritrade will be bringing in $1.3 trillion in client assets and $5 billion in annual revenue. It will also bring 12 million client accounts. CEO and interim president of TD Ameritrade, Stephen Boyle, said,

“We share a common history – a journey since 1975 that has made Wall Street more accessible and financial dreams more attainable for millions of Americans. […] Together, we can deliver the ultimate client experience for retail investors and independent registered investment advisors.”

The president and CEO of Schwab, Walt Bettinger, explained that his brand has “respected” the work of TD Ameritrade since it first emerged in the discount brokerage industry. Bettinger explained,

“[A]s a fellow advocate for investors and independent investment advisors. Together, we share a passion for breaking down barriers for investors and advisors through a combination of low cost, great service, and technology.”

While TD Ameritrade recently generated about $17 billion in total annualized revenue and pre-tax profits, Schwab generated $8 billion from these sources. For every TD Ameritrade share, shareholders will receive 1.0837 Schwab shares, representing a 17% premium for the average price exchange ratio of a 30-day period, based on data through November 20th.

Presently, the Toronto-Dominion Bank (TD Bank) holds about 43% of TD Ameritrade. However, as the company combines with Schwab, TD Bank’s holding will reduce to 13% with a cap on the voting stake at 9.9%. The rest of the position will be placed in a non-voting class of stock.

The whole process of integrating these companies could take 1.5 to 3 years, as there are multiple variables. The deal states that the final location of the combined corporate headquarters will be based in Westlake, Texas, which is Schwab’s new campus.

The news of the acquisition launched last week, though the official announcement on the acquisition wasn’t released until a few days later. Considering that TD Ameritrade also has cryptocurrency offerings, Schwab will need to decide how best to integrate it into their platform. Schwab has previously stated that it isn’t planning to make the company into a source of direct trading services for cryptocurrency anytime in its immediate future. TD Ameritrade, however, already allows consumers to trade bitcoin futures with CME Group, a derivatives exchange.

While The Block has reached out for comments from Schwab and TD Ameritrade, no response has been issued.

Acquisitions are a frequent occurrence in the financial industry, as companies seek to gain greater appeal to customers. Now, a new acquisition involving Schwab and a company that offers cryptocurrency trading is set to take place. What can customers expect?

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