TD Ameritrade is to acquire Scottrade Financial Services in a cash and stock transaction valued at USD4 billion.
For TD Ameritrade, the transaction adds significant scale to its retail business, more than quadrupling the size of its branch network.
The company expects to realise approximately USD450 million in combined annual expense synergies, and more than USD300 million in additional longer-term opportunities. The first 25 per cent of the expense synergies are expected to be realised in year one post-close and the remainder realised in year two. 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 and Scottrade, will take place in two, concurrent steps.
First, TD will purchase Scottrade Bank from Scottrade Financial Services for USD1.3 billion in cash consideration. Under the terms of the proposed acquisition, Scottrade Bank will merge with and into TD Bank, an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. Additionally, TD will purchase USD400 million in new common equity (11 million shares) from TD Ameritrade in connection with the proposed transaction, pursuant to its preemptive rights.
Immediately following that acquisition, TD Ameritrade will acquire Scottrade Financial Services for USD4 billion, or USD2.7 billion net of the proceeds from the sale of Scottrade Bank. The USD2.7 billion will be comprised of USD1.0 billion in new common equity (28 million shares) issued to Scottrade shareholders; and USD1.7 billion in cash, which includes TD Ameritrade cash (USD900 million), a new debt offering (USD400 million), and the proceeds from the sale of 11 million shares to TD (USD400 million).
Following the transaction’s close, Scottrade founder and CEO Rodger Riney will be appointed to the TD Ameritrade board of directors.
“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,” says Tim Hockey (pictured), 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,” says Riney. “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 30 September 2017, with an anticipated clearing conversion to TD Ameritrade systems in 2018.
Barclays Capital is serving as financial adviser to TD Ameritrade, and Wachtell, Lipton, Rosen & Katz is serving as legal adviser to TD Ameritrade. Goldman Sachs is serving as financial adviser to Scottrade, and Sullivan & Cromwell is serving as legal adviser to Scottrade.
