Editor’s note: The following is a transcript of the accompanying video. ©2019 Thomson Reuters
A $26 billion deal that could shake up the brokerage sector: Charles Schwab is buying its smaller rival TD Ameritrade, creating a behemoth. The combined company will boast $5 trillion in assets, controlling up to 70% of investment account assets.
Analysts say the deal will likely be scrutinized by regulators but still get the nod. Startups like Robinhood have disrupted the discount brokerage industry, gobbling up market share. As a result, Schwab became the first big brokerage to eliminate trading fees last year, and Fidelity, Ameritrade, and E-Trade Financial have since followed suit.
Through the deal, analysts say TD Ameritrade clients could gain access to Schwab’s services like wealth and asset management and banking, while Schwab customers could see improvements in trade technology and educational investing tools.
Schwab is forking over a 26% premium based on Ameritrade’s closing price the day before CNBC reported on the takeover talks last week. Schwab and Ameritrade say the deal will add up to 15% in earnings per share in the third year after the deal closes.
Investors showed their approval, sending shares of both brokers up in early trading Monday.
The companies expect to close the deal in the second half of next year.