Banker Morgan Stanley (NYSE:MS) made waves on Thursday after it announced plans to acquire discount brokerage E*Trade Financial Corp (NASDAQ:ETFC) in an all-stock takeover worth $13 billion.
The move adds strength to the investment banker’s wealth management unit at a time when the discount brokerage sector is seeing increased pressure on its business model.
Shares of Morgan Stanley dipped in New York, down 3.3% at $54.46, while E-Trade’s shares soared 26.4% to reach $56.81 on Thursday morning.
READ: Charles Schwab and TD Ameritrade join forces in $26 billion all-stock deal
The acquisition is the largest by a Wall Street bank since the global financial crisis hit the street in 2008 and 2009. However, the deal is far from assured as regulators will be guaranteed to take a close look at whether the transaction violates antitrust laws.
If successful, Morgan Stanley will get E*Trade's over 5.2 million client accounts and $360 billion of retail client assets. E*Trade’s CEO Mike Pizzi is tapped to run the business post-merger, Reuters reported.
E*Trade shareholders will get 1.0432 Morgan Stanley shares for each share as part of the deal, which translates to $58.74 per share.
Analyst Keith Horowitz called the deal a “strategic fit” in a Thursday note, saying that Morgan Stanley’s stock is down as a reaction to the premium it is paying for E*Trade.
Morgan Stanley’s move comes after last year’s purchase of TD Ameritrade Holding Corp by rival Charles Schwab Corp for a massive $26 billion.
The E*Trade deal is set to close in the fourth quarter of 2020.
Contact Angela at angela@proactiveinvestors.com
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