Morgan Stanley has pushed into retail in the largest Wall Street acquisition since the GFC.
The purchase opens up a significant chunk of the retail market to the Wall Street giant, positioning them as a top player across financial advisory and workplace and self-directed finance. The combined platforms will have $3.1 trillion client assets, 8.2 million retail client relationships and accounts, and 4.6 million stock plan participants.
“E-TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy,” said Morgan Stanley chairman and CEO James Gorman.
“The combination adds an iconic brand in the direct-to-consumer channel to our leading adviser-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees.”
Morgan Stanley will buy the online brokerage in an all-stock transaction valued at approximately $13 billion. E*TRADE stockholders will receive 1.0432 Morgan Stanley shares for each E*TRADE share, representing a per share consideration of $58.74 based on the closing price of Morgan Stanley common stock on 19 February 2020.
The acquisition will significantly increase the scale of Morgan Stanley’s retail business, accelerating its transition to a more balance sheet light business mix and opening up more durable sources of revenue.
The transaction is also expected to provide potential cost savings of $400 million from maximising efficiencies of technology infrastructure and optimising shared corporate services, as well as potential funding synergies of approximately $150 million.
“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,” said Mike Pizzi, chief executive of E*TRADE.
“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.”