Morgan Stanley to buy E*Trade Financial in $13-billion deal

Darnell Taylor
February 21, 2020

USA investment bank Morgan Stanley announced on February 20 it will buy online trading pioneer E*Trade in a deal valued at $13 billion.

"E*Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy", Chief Executive Officer James Gorman said in the statement.

Big banks have been emboldened to do deals that would have been tricky for the Wall Street titans under President Barack Obama's administration. It was followed by approval for a $28 billion marriage of BB&T Corp. and SunTrust.

Gorman sounded confident that the deal would go through without any regulatory hurdles.

The U.S. Federal Reserve did not immediately comment on the deal.

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Last year, wealth management accounted for more than half of Morgan Stanley's record $41 billion in revenue.

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E*Trade became popular almost two decades ago by running commercials that blasted financial advisers for high fees.

The $13 billion deal marks Morgan Stanley's largest takeover since the crisis of 2008, also bringing along E*Trade's five million clients, $360 billion in assets and an online bank, the Wall Street Journal reported on February 20.

All three brokerages were hurting from falling commissions and low interest rates.

We believe that narrow-moat Morgan Stanley (MS) may be underselling its likely expense and revenue synergies in its announced merger with narrow-moat E-Trade (ETFC).

Previous year it also got caught up in a price war initiated by Charles Schwab, which then struck a $26 billion deal to buy TD Ameritrade. That translates to $58.74 per share - a premium of 30.7% to the last closing price of E*Trade shares.

The all-stock deal, expected to close in the fourth quarter of this year, will create a combined platform with more than 8 million client accounts and relationships and $3.1 trillion in assets, according to the bank.

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