On November 26, Charles Schwab, which is a publicly-traded discount broker, announced that it reached an agreement with TD Ameritrade. Stocks reacted to this news, as 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.
Charles Schwab will acquire its competitor TD Ameritrade in a $26 billion all-stock deal. Based on the information, Ameritrade stockholders will receive 1.087 Schwab shares for every share they own.
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 remarkable result.
Brokerage industry and stock markets
The decision to acquire TD Ameritrade will have a serious impact on the brokerage industry. Moreover, this new affect Wall Street and stocks in general.
It will take 18 months to complete this deal. Nevertheless, U.S. authorities must approve this agreement.
Based on the information, the integration of the two companies will take between 18 to 36 months after the deal is closed. The combined company will spend $1.6 billion to cover the costs associated with integration over three years.
The headquarters of the combined company will be located in Westlake, Texas.
Schwab’s present shareholders will own 69% of the combined company, while TD Ameritrade’s stakeholders will receive 18% of the company.
TD Bank, which owns 43% of TD Ameritrade, will hold 13% of this giant company.
Thanks to this deal, 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.
Even though Ameritrade’s market value is smaller, it plays a significant role in the market. The market value of Ameritrade is $22.4 billion.