Early this morning prior to the U.S. markets open, online brokerage pioneer and financial services company E*TRADE Financial Corp. (ETFC:NASDAQ), announced that it has entered into a definitive agreement to be acquired by Morgan Stanley (MS:NYSE). The agreement is structured as an all-stock transaction valued at approximately $13 billion. The terms of the agreement provide that "E*TRADE stockholders will receive 1.0432 Morgan Stanley shares for each E*TRADE share, which represents per share consideration of $58.74 based on the closing price of Morgan Stanley common stock on February 19, 2020."
According to the report, "the combination will significantly increase the scale and breadth of Morgan Stanley's Wealth Management franchise, and positions the firm to be an industry leader in Wealth Management across all channels and wealth segments." The combined company will bring together E*TRADE's 5.2 million customer accounts with more than $360 billion of retail client assets and Morgan Stanley's 3 million current customers and its $2.7 trillion of client assets under management. The strategy and rationale for the merger is that "Morgan Stanley's full-service, advisor-driven model coupled with E*TRADE's direct-to-consumer and digital capabilities, will allow the combined business to have best-in-class product and service offerings to support the full spectrum of wealth."
The report indicated that the acquisition is expected to close in Q4/20 subject to customary closing conditions, regulatory approvals and E*TRADE shareholder approval.
James Gorman, Chairman and CEO of Morgan Stanley commented, "E*TRADE 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. E*TRADE's 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...This continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasizing more durable sources of revenue...I am delighted that Mike Pizzi, CEO of E*TRADE, will be joining Morgan Stanley. Mike will continue to run the E*TRADE business within the Morgan Stanley franchise and lead the ongoing integration effort."
E*TRADE's CEO Mike Pizzi remarked, "Since we created the digital brokerage category nearly 40 years ago, E*TRADE 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 E*TRADE's brand and offerings under the Morgan Stanley umbrella creates a truly exciting wealth management value proposition and enables our collective team to serve a far wider spectrum of clients."
E*TRADE is based in Arlington, Va., and is a "provider brokerage, banking and financial services to investors, traders, stock plan administrators and participants, and registered investment advisers." The company's bank products and custody services are offered through E*TRADE Bank and E*TRADE Savings Bank, which are both federal savings banks (Members FDIC).
Morgan Stanley operates in more than 41 countries and is headquartered in New York, and has a market cap of about $91.1 billion. The firm is well-known global financial services firm offering investment banking, wealth management, securities and investment management services to individuals, corporations, governments, and other large institutions.
E*TRADE began the day with a market capitalization of around $10.0 billion with approximately 222.6 million shares outstanding and a short interest of about 2.00%. ETFC shares opened nearly 24% higher today at $55.68 (+$10.75, +23.93%) over yesterday's $44.93 closing price and reached a new 52-week high price this morning of $57.30. The stock has traded today between $55.17 and $57.30 per share and is currently trading at $55.27 (+$10.34, +23.01%).[NLINSERT]
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.