E*TRADE is an online financial services firm with more than 5.2 million client accounts and more than $360bn of retail client assets


E*Trade financial centre in San Francisco. (Credit: Thomas Hundt/Wikipedia.org)

US-based investment banking company Morgan Stanley has agreed to acquire E*TRADE Financial, a Virginia-based electronic trading platform provider, in an all-stock deal worth around $13bn.

E*TRADE and its subsidiaries cater to traders, stock plan administrators and participants, investors, and registered investment advisers (RIAs) with brokerage and banking products and services.

Founded in 1982, the electronic trading platform provider is said to have more than 5.2 million client accounts and more than $360bn of retail client assets, which will add to Morgan Stanley’s existing three million clients and $2.7 trillion of client assets.

E*TRADE CEO Mike Pizzi said: “Since we created the digital brokerage category nearly 40 years ago, E*TRADE has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders, and stock plan administrators.

“By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities.

“Bringing E*TRADE’s brand and offerings under the Morgan Stanley umbrella creates a truly exciting wealth management value proposition and enables our collective team to serve a far wider spectrum of clients.”

According to Morgan Stanley, the acquisition of the Virginia-based online financial services firm will considerably grow the scale and breadth of its wealth management franchise. Besides, it is expected to help Morgan Stanley take a top position in wealth management across all channels and wealth segments.

Morgan Stanley further claimed that the combination of its full-service, advisor-driven model and E*TRADE’s direct-to-consumer and digital capabilities will support the full spectrum of wealth by offering the best-in-class product and services.

The acquisition is also expected to help Morgan Stanley in consolidating its position in workplace wealth. This will be through the combination of E*TRADE’s US stock plan business with Morgan Stanley’s Shareworks, which offers public stock plan administration and private cap table management solutions.

The combination is expected to help Morgan Stanley in fast-tracking initiatives for improving the workplace offering with online brokerage and digital banking capabilities to deliver a better client experience.

Morgan Stanley chairman and CEO James Gorman said: “E*TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy.

“The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees.

“E*TRADE’s products, innovation in technology, and established brand will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace.

“In addition, this continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasising more durable sources of revenue.”

Details of the all-stock deal between Morgan Stanley and E*TRADE

As per the terms of the deal, E*TRADE’s shareholders will exchange each of their shares with 1.0432 of Morgan Stanley’s shares. The all-stock deal values each share of the electronic trading platform provider at $58.74.

The transaction is likely to be closed in the fourth quarter of this year, subject to regulatory approvals and approval by E*TRADE’s shareholders, besides fulfilling other customary closing conditions.