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The
deal is expected to be heavily scrutinized by regulators, and is
a response to recent disruption in the industry, where nimbler
startups like Menlo Park, California-based Robinhood are rapidly
gaining market share by eliminating commissions on stock trades.
TD Ameritrade's shares were up 2.8%, while Schwab was down 2.1%
in premarket trade.
As part of the deal, expected to close in the second half of
2020, Ameritrade stockholders will get 1.0837 Schwab shares for
every share held, or $52.23 based on Schwab's Friday close.
The deal is expected to add 10%-15% to GAAP EPS and 15%-20% to
operating cash EPS in the third year following the close of the
deal, the companies said.
"Some of the expense synergies the combined firm expects to
realize will come from elimination of overlapping and
duplicative roles."
Based on Schwab's Friday close, the deal represents a premium of
26% to TD Ameritrade's closing price on Wednesday, a day before
CNBC reported the deal, citing sources. The news had sent TD
Ameritrade's shares surging as much as 25% on Thursday.
TD Ameritrade CEO Tim Hockey is due to step down in February.
The companies said on Monday they will suspend the CEO search
and named TD Ameritrade Chief Financial Officer Stephen Boyle as
TD's interim president and CEO.
Last week, CNBC reported the combined company is expected to be
led by Schwab's Chief Executive Officer Walt Bettinger.
The new combined entity would have assets of about $5 trillion.
Credit Suisse Securities (USA) was Schwab's financial adviser,
while PJT Partners LP and Sandler O'Neill + Partners LP advised
TD Ameritrade.
(Additional reporting by Bharath Manjesh and Tamara Mathias;
Editing by Shounak Dasgupta)
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