The M&A market continued to heat up over the weekend, with TD Ameritrade Holding Corp. (NASDAQ:AMTD) saying it will acquire fellow online stock brokerage Scottrade for $4 billion.
AMTD will use a combination of cash and stock to finance the deal. The company noted the acquisition of privately-held Scottrade will result in approximately $450 million in combined annual expense synergies, and more than $300 million in additional longer-term opportunities.
TD Ameritrade described the structure of the deal via press release:
The transaction, which has been approved by the boards of directors of TD Ameritrade, TD Bank Group (TD) and Scottrade, will take place in two, concurrent steps. First, TD will purchase Scottrade Bank from Scottrade Financial Services, Inc. for $1.3 billion in cash consideration. Under the terms of the proposed acquisition, Scottrade Bank will merge with and into TD Bank, N.A., an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. Additionally, TD will purchase $400 million in new common equity (11 million shares) from TD Ameritrade in connection with the proposed transaction, pursuant to its preemptive rights.
Then, immediately following that acquisition, TD Ameritrade will acquire Scottrade Financial Services, Inc., for $4 billion, or $2.7 billion net of the proceeds from the sale of Scottrade Bank.
Scottrade currently boasts $944 million in client assets, with over 10 million client accounts generating 600,000 average trades per day.
As a result of the transaction, TD Ameritrade will accelerate its latest earnings release. The company will bump its earnings announcement to this morning, rather than tomorrow morning as originally scheduled.
AMTD shares fell $0.38 (-1.02%) to $36.70 in premarket trading Monday on the acquisition news. Year-to-date, AMTD stock has risen 6.83%.