- The transaction adds significant scale to Ameritrade's retail business, extends its leadership in trading, and more than quadruples the size of its branch network
- The transaction will take place in two steps and is parties expected to close by Sept. 30, 2017
- Rodger Riney will be appointed to the TD Ameritrade Board of Directors
TD Ameritrade and Scottrade Financial Services, have entered into a definitive agreement for TD Ameritrade to acquire Scottrade in a cash and stock transaction valued at $4 billion.
The transaction combines two highly complementary organizations with long histories of helping millions of people invest in their financial futures. For TD Ameritrade, the transaction adds significant scale to its retail business, extends its leadership in trading, and more than quadruples the size of its branch network.
The company expects to realize approximately $450 million in combined annual expense synergies, and more than $300 million in additional longer-term opportunities. The first 25 percent of the expense synergies are expected to be realized in Year 1 post-close and the remainder realized in Year 2. Furthermore, the transaction is expected to generate double-digit EPS accretion post-conversion.
The transaction, which has been approved by the boards of directors of TD Ameritrade, TD Bank Group (TD) and Scottrade, will take place in two, concurrent steps. First, TD will purchase Scottrade Bank from Scottrade Financial Services, for $1.3 billion in cash consideration. Under the terms of the proposed acquisition, Scottrade Bank will merge with and into TD Bank, N.A., an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. Additionally, TD will purchase $400 million in new common equity (11 million shares) from TD Ameritrade in connection with the proposed transaction, pursuant to its preemptive rights.
Then, immediately following that acquisition, TD Ameritrade will acquire Scottrade Financial Services, for $4 billion, or $2.7 billion net of the proceeds from the sale of Scottrade Bank.
The $2.7 billion will be comprised of:
- $1.0 billion in new common equity (28 million shares) issued to Scottrade shareholders; and
- $1.7 billion in cash, which includes TD Ameritrade cash ($900 million), a new debt offering ($400 million), and the proceeds from the sale of 11 million shares to TD ($400 million).
Additionally, following the transaction’s close, Scottrade Founder and CEO Rodger Riney will be appointed to the TD Ameritrade Board of Directors.
For the 12 months ended Sept. 30, 2016, TD Ameritrade and Scottrade, on a pro-forma combined basis, had $944 billion in total client assets.
“For more than 40 years, TD Ameritrade has been committed to breaking down the barriers that stand between American investors and Wall Street. That means delivering an investing experience grounded in technology and innovation that educates and enables investors with all levels of ability and wealth to work toward their financial goals,” said Tim Hockey, TD Ameritrade president and chief executive officer. “We’ve found in Scottrade a partner with an equally-strong passion and a proven track record for delivering exceptional client experiences. This combination will allow us to leverage our strengths and increase our scale, further accelerate our asset gathering capabilities and introduce our award-winning line-up of trading tools, products and education services to millions of new investors.”
“Since founding Scottrade in 1980, our mission has been to lower the cost of investing and trading while treating clients fairly and honestly. Over the last 36 years, thanks to the tireless efforts of our talented associates, we have expanded our services and evolved the business while maintaining our commitment to helping people overcome barriers to financial success,” said Rodger Riney, Scottrade founder and chief executive officer. “We are confident we have found a great partner in TD Ameritrade, who shares our client-first focus. Joining forces will enable us to offer clients an expanded array of trading tools, enhanced education resources and advanced option capabilities with broader geographic reach. Together, we will be well-positioned to compete in today’s rapidly evolving financial services industry.”
The transaction is subject to regulatory approval and customary closing conditions. The parties expect it to close by Sept. 30, 2017, with an anticipated clearing conversion to TD Ameritrade systems in 2018.