The merging of the two biggest publicly traded discount brokers will create a mammoth with more than $5 trillion in client assets.
As part of the agreement, Ameritrade stockholders will receive 1.0837 Schwab shares for every share held. The deal is expected to close in the second half of 2020.
Shares of TD Ameritrade rose 2.4% to $49.26 in premarket trading, while Schwab shares climbed about 1% to $48.64. The merging of the two biggest publicly traded discount brokers will create a mammoth with more than $5 trillion in client assets, $3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade.
The deal will create "a Goliath in Wealth Management," Wells Fargo senior analyst Mike Mayo said in a note to clients on Thursday, when talks of the merger wereConsolidation in the brokerage industry is expected given the massive amount of disruption, with all the major brokers dropping commission fees for trading in recent months.
The advantage to the Schwab-TD Ameritrade deal is the brokerage giant will be able to cut costs, stream new revenue opportunities and improve the platform for clients, said JMP Securities analyst Devin Ryan. Given the high amount of overlapping back-office operations and vendor costs, Stephen Biggar, Argus Research Director of Financial Institutions Research, expects to see about 60% of TD Ameritrade's costs removed following the sale.
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