Both Charles Schwab and TD Ameritrade began their journey more than four decades ago as alternatives to traditional Wall Street brokerages


Charles Schwab to acquire TD Ameritrade (Credit: Djkeddie/Wikimedia Commons)

US financial services providers Charles Schwab and TD Ameritrade have agreed to merge in an all-stock deal worth around $26bn.

Based in Nebraska, TD Ameritrade is engaged in providing investment services and consultation to nearly 12 million client accounts, and custodial services to more than 7,000 registered investment advisors.

Charles Schwab, which is based in California, offers wealth management, securities brokerage, asset management, banking, custody, and financial advisory services. The company caters to individual investors and independent investment advisers.

Both Charles Schwab and TD Ameritrade began their journey more than four decades ago as alternatives to traditional Wall Street brokerages.

Charles Schwab president and CEO Walt Bettinger said: “We have long-respected TD Ameritrade since our early days pioneering the discount brokerage industry, and as a fellow advocate for investors and independent investment advisers. Together, we share a passion for breaking down barriers for investors and advisers through a combination of low cost, great service and technology.

“With this transaction, we will capitalise on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys.”

The merger is expected to give significant benefits for the combined entity apart from providing attractive returns for the owners of the two firms. It is also claimed to help in further enhancing the investing and trading experience of clients of both the firms.

Charles Schwab expects the deal to help it continue to add further scale on top of its organic growth to bring in sustainable, profitable growth, and creation of long-term value.

The resulting combined company, following the merger, is likely to have 24 million client accounts to serve, while managing more than $5 trillion in client assets. The annualised revenue of the combined firm is around $17bn, while the pre-tax profits are about $8bn, based on the recent performances of the constituent companies.

Charles Schwab, TD Ameritrade merger terms

As per the merger terms, TD Ameritrade’s stockholders will be issued 1.0837 Charles Schwab’s shares for each TD Ameritrade share.

Upon completion of the merger, The Toronto-Dominion Bank (TD Bank), which currently owns about a 43% stake in TD Ameritrade, will own about 13% in the combined company. Other TD Ameritrade’s stockholders will own an 18% stake, while existing Charles Schwab’s stockholders will keep the remaining 69% stake in the enlarged group.

TD Ameritrade interim president and CEO Stephen Boyle said: “Together, we can deliver the ultimate client experience for retail investors and independent registered investment advisors.

“We can continue to challenge the status quo, pooling our resources and expertise to transform lives — and investing — and deliver sustainable, long-term value to our many stakeholders.”

Subject to regulatory approvals, shareholders’ approvals of both the firms, and other customary closing conditions, the deal is expected to be completed in the second half of 2020.