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Morgan Stanley acquires E*TRADE for $13 billion

Morgan Stanley is acquiring online brokerage pioneer E*TRADE in an all-stock transaction valued at approximately $13 billion. Under the terms of the agreement, E*TRADE shareholders will receive 1.0432 Morgan Stanley shares for each E*TRADE share, equivalent to a per share consideration of $58.74 based on the closing price of Morgan Stanley common stock on 19 February 2020.

The deal creates a wealth management behemoth with $3.1 trillion in client assets, 8.2 million retail client relationships and accounts, and 4.6 million stock plan participants, significantly increasing 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.

E*TRADE has over 5.2 million client accounts with more than $360 billion of retail client assets, adding to Morgan Stanley’s existing 3 million client relationships and $2.7 trillion of client assets. The bank’s full-service, advisor-driven model offers a high-end fit with E*TRADE’s direct-to-consumer and digital capabilities.

“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,” said James Gorman, chairman and CEO of Morgan Stanley. “

He added that the deal continues the bank’s 10-year long transition “to a more balance sheet light business mix, emphasizing more durable sources of revenue”. The combined Wealth and Investment Management businesses will contribute approximately 57% of the firm’s pre-tax profits, excluding potential synergies, compared to approximately 26% in 2010. The acquisition is expected to close in the fourth quarter of 2020 but does require approval from the US Federal Reserve and the Office of the Comptroller of the Currency.

Mike Pizzi, CEO of E*TRADE, said: “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.”




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