Morgan Stanley to buy E*Trade in all-stock deal worth $13 billion

Andrew Cummings
February 20, 2020

Morgan Stanley has agreed a deal to buy online discount brokerage E*Trade Financial in an all-stock deal worth around $13 billion.

The deal also is the latest chapter in Morgan Stanley's transformation from the scrappy, deal-doing, stock-trading investment bank to a more well-rounded financial firm now more reliant on its asset and wealth management businesses.

The race to commission-free trading has shaken up the discount brokerage industry, with E*Trade rival Charles Schwab Corp. announcing it was eliminating trading commissions for USA -listed stocks, exchange-traded funds and options, and then agreeing to buy competitor TD Ameritrade Holding Corp.

E-Trade, with 5.2 million client accounts and over $360bn of retail client assets, will be adding to Morgan Stanley's 3 million client accounts and $2.7tn of client assets, a press release said.

E*Trade shares skyrocketed more than 21 percent in premarket on news of the takeover, which comes on the heels of Charles Schwab's blockbuster $26 billion acquisition of TD Ameritrade that was announced in November. The brokerage's CEO, Mike Pizzi, will continue to run the business following the merger. E-Trade has a popular online platform that helps businesses manage their employee stock plans, which will be merged into Morgan Stanley's existing platform as well.

"E-trade has almost 2 million corporate stock plan customers and so this strategically widens the potential opportunity for Morgan Stanley to convert those customers", Ryan added.

The deal, which is anticipated to generate $400 million in cost savings, is expected to close in the fourth quarter.

E*Trade stockholders will receive 1.0432 Morgan Stanley shares for each of their shares, valued at US$58.74 based on Wednesday's closing price.

Shares of Morgan Stanley fell 3.7% before the market open, while E-Trade's stock surged 24.1%.

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