Charles Schwab and a $26 billion all-stock deal

On Monday, Charles Schwab, which is one of the biggest publicly traded discount brokers made an announcement that affected the stock markets. According to this announcement, Charles Schwab will acquire its competitor TD Ameritrade in a $26 billion all-stock deal.

The shares of Charles Schwab increased by 2.3% to $49.31. Meanwhile, the shares of TD Ameritrade rose by 7.6% to $51.78 on Monday.

It is worth mentioning that the emerging of the biggest discount traders will create a different situation. Charles Schwab controls $3.8 trillion in client assets while TD Ameritrade is responsible for $1.3 trillion. Together they will control more than $5 trillion in client assets which is a phenomenal result.

As a result, the combined company will serve more than 24 million clients. It is interesting to have a look at the market value of these companies. The market value of Schwab, which is based in San Francisco is $57.5 billion. In Comparison with its former competitor, its market value is significantly larger than of TD Ameritrade. It does not mean that Ameritrade is a small company as its market value is $22.4 billion.

Brokerage industry and Charles Schwab

Based on the information, it will take 18 months to complete this deal. However, U.S. authorities have to approve this agreement.

The integration of the two companies will take between 18 to 36 months after the deal is closed. The company is going to spend $1.6 billion to cover the costs associated with integration over three years. Another decision that will affect the TD Ameritrade is that the headquarters of the combined company will relocate to Texas.

Schwab’s current shareholders will own 69% of the combined company, while TD Ameritrade’s stakeholder will receive 18% of the company.

TD Bank, which owns 43% of TD Ameritrade will hold 13% of this giant company.