Major hurdles were cleared in the Charles Schwab/TD Ameritrade merger on Thursday, bringing the possibility of a combined firm—first announced in November 2019—much closer to reality.
First, Schwab announced that the deal had received antitrust approval from the U.S. Department of Justice (DOJ), removing a huge potential stumbling block. That was followed later in the day by announcements that the stockholders of both firms overwhelmingly approved the merger agreement, with more than 99% of the votes cast being in favor of the proposal.
The $26 billion all-stock deal between the two largest publicly traded discount brokers will create a brokerage giant with more than $5 trillion in client assets ($3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade).
“We’re gratified by the DOJ’s decision and appreciate its diligent and thorough review. We are pleased to be clearing an important milestone in our planned acquisition of TD Ameritrade,” Schwab President and CEO Walt Bettinger said in a statement.
Later in the day, he added the following statement after the stockholder vote: “We are pleased that Schwab’s stockholders have approved the proposals related to our announced acquisition of TD Ameritrade. The combination will generate substantial long-term value for Schwab’s stockholders and bring together two leading firms with proud and similar histories of making investing more accessible to all. Together, with a focus on low cost, great service and technology, we will form a company that is uniquely positioned to serve the investment, trading and wealth management needs of investors—and the advisors who serve them—in every phase of their financial journey.”
Steve Boyle, interim president and CEO, TD Ameritrade, chimed in with his own statement after the TD stockholder vote: “We are pleased that our shareholders are supportive of this transformative opportunity to create the ultimate client experience for retail investors and independent registered investment advisors. We look forward to joining forces with Schwab to deliver sustainable, long-term value to our many stakeholders.”
Both companies say integration planning is on-track and the deal is expected to be completed in the second half of 2020, subject to customary closing conditions, including receipt of the remaining required regulatory approvals. Integration is expected to take between 18 to 36 months to complete following the close.
Schwab had previously named Senior EVP and COO Joe Martinetto to oversee the integration initiative, assisted by a team of experts from both Schwab and TD Ameritrade. As part of the integration process, the corporate headquarters of the combined company will eventually relocate to Schwab’s new $100 million campus in Westlake, Texas, about 23 miles north of downtown Fort Worth.
Both companies have a sizable presence in the Dallas-Fort Worth area. The approximately 1 million-square-foot Westlake campus could eventually house about 7,000 employees.
More deal deets
More than 99% of the shares cast by Schwab stockholders on Thursday were voted in favor of a proposal to issue new Schwab common shares to TD Ameritrade stockholders as consideration for the acquisition, the company reported. More than 98% of the shares cast, representing over 85% of all outstanding shares, were voted in favor of an amendment to the fifth amended and restated certification of incorporation of Schwab to create a new class of nonvoting common stock to be issued to TD Bank and its affiliates as merger consideration.
Pursuant to the Schwab charter amendment, the number of authorized shares of Schwab capital stock will increase by 300 million, and Schwab will be authorized to issue 300 million shares of Schwab nonvoting common stock, each with a par value of $0.01 per share.
When it was originally announced, industry observers said the key antitrust concern wasn’t their discount brokerage operations but Schwab’s resulting dominance in the RIA custody space. But the DOJ investigation apparently did not turn up any violation.
Post-transaction, CNBC said Schwab will hold over a third of the RIA custody market, JMP Securities estimates, while Barron’s reports Cerulli Associates has estimated the merged company would have a majority—51%—of RIA assets. The company will capture about 11% of client assets in the retail financial services market, Schwab said at the time the deal was announced.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
