Standard brokerage markets in North America are considered a monopoly, with the most significant operators purchasing their competition in acquisition deals. This was proven again with the announcement that Morgan Stanley is buying ETrade Financial Corp for $13 billion. Financial analysts were rocked by this revelation, with it being the most significant transaction made by Morgan Stanley since the American Financial Crisis. This payout is minimal in comparison to Charles Schwab purchasing TD Ameritrade for $26 billion.
Under the conditions of this acquisition contract, Morgan Stanley is paying $58.75 per share for ETrade Financial Corp stocks. This will include a final closing price with premiums listed at $0.30 per cent, with these costs being discounted to the actual valuation of ETrade. Discounts followed after Morgan Stanley agreed to provide ETrade shareholders 1.432 MS Shares for the 221+ thousand stocks being purchased in Q1 2020. Financial analysts are considering this acquisition contract to be more similar to a partnership than an aggressive takeover.
The chief executive officer behind ETrade Financial Corp, Mike Pizzi, spoke on this acquisition announcement. He expressed: “Since we created the digital brokerage category nearly 40 years ago, ETrade has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders, and stock plan administrators. By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities. Bringing ETrade’s brand and offerings under the Morgan Stanley umbrella creates a fascinating wealth management value proposition and enables our collective team to serve a far wider spectrum of clients.”
Combined Assets
The purchase date for this acquisition contract is listed under the first quarter in 2020. Contract agreements won’t become into effect until the fourth quarter, which follows after Morgan Stanley confirmed the American Multinational Bank would assist growth with their Wealth Management Unit. This will increase the scale of ETrade Financial Corp’s products on an American and international level. It should be noted that combining the designated assets from each of these groups will see ETrade engage with $3.1 trillion in client assets. This extends to an additional 8.2 million in active retail client accounts and 4.6 million stock platform participants.
The chairman and chief executive officer at Morgan Stanley, James Gorman, also spoke on the acquisition announcement. He mentioned: “ETrade represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy. The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees.”
Those statements from James Gorman continued with: “ETrade products, innovation in technology, and established brand will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace. Also, this continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasizing more durable sources of revenue.”