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Shareholders, DOJ Clear the Way for Schwab/TD Ameritrade Merger

TD and Schwab shareholders voted in favor of the merger; Schwab expects the deal to close in the second half of this year, with an integration period of 18 to 36 months.

TD Ameritrade and Schwab shareholders approved Schwab’s acquisition of the company Thursday afternoon, with 99% of votes cast at both firms in favor of the merger agreement at their respective shareholder meetings.

The votes followed news early Thursday morning that the Department of Justice closed its antitrust investigation into the deal. The moves cleared the last hurdle Schwab needed before the deal could be finalized. 

“We’re gratified by the DOJ’s decision and appreciate its diligent and thorough review,” Schwab CEO Walt Bettinger said in a statement. “We are pleased to be clearing an important milestone in our planned acquisition of TD Ameritrade and look forward to today’s scheduled votes by the stockholders of our two companies, which represent another important step toward completion of the transaction.”

“We are pleased that our shareholders are supportive of this transformative opportunity to create the ultimate client experience for retail investors and independent registered investment advisors,” said Steve Boyle, interim president and CEO, TD Ameritrade, in a statement.

TD Ameritrade’s stock was up nearly 9% on Thursday, with Schwab’s shares rising about 5.5% during the day.

The proposed acquisition drew antitrust scrutiny when it was initially announced last November; the merger would create a new titan in the financial services space, with some $5 trillion in combined assets. Bettinger has downplayed the firm’s market position in the RIA custody space, pointing to myriad options and business channels both investors and financial advisors have available. 

According to a note from Keefe, Bruyette & Woods analyst Kyle Voigt, Schwab holds about half of the market share of total RIA custody assets, while TD Ameritrade holds about 15% to 20%.

Schwab agreed to acquire TD Ameritrade in an all-stock transaction the companies say is valued at $26 billion, or about $48.50 per share, a 19% premium based on Schwab’s share price as of close on Nov. 20. TD Ameritrade stockholders will receive 1.0837 Schwab shares for each TD Ameritrade share, under the terms of the transaction.

The merger will combine Schwab’s $3.8 trillion in client assets, of which $1.8 trillion is in advisory services, with TD Ameritrade’s $1.3 trillion. TD Ameritrade doesn’t break out assets on the platform from the RIA channel, but it has an estimated 11% of the more than $4 trillion market of independent RIAs. The combined firm could have over $5 trillion in assets, with an estimated $2.2 trillion of that total custodied for some 13,500 RIA clients.

“Together, with a focus on low cost, great service and technology, we will form a company that is uniquely positioned to serve the investment, trading and wealth management needs of investors—and the advisors who serve them—in every phase of their financial journey,” Bettinger said.

The deal will cement Schwab’s position as the largest RIA custodian in the industry by far and be a transformative shift in the wealth management landscape. It will create a dominant power among the fast-growing RIA channel, reorienting the direction of the remaining custodians' tech road maps and putting Schwab, the upstart discount brokerage firm founded by Charles Schwab in 1971, on equal footing with the largest of the traditional Wall Street wirehouses. It could also threaten the cost-conscious innovation and support that smaller advisors depend on—early advisor fintech innovations created by small technology firms often found a foothold in the industry on TD Ameritrade's platform.

Despite industry concerns about how the merger will impact smaller advisors, Schwab has reiterated its commitment to serve RIAs of all sizes, including smaller RIAs with under $100 million in assets under management.

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