Morgan Stanley buys E * Trade in a $ 13 billion deal that will be the largest acquisition from a US bank since the 2008 financial crash, was announced on Thursday.
The plans of the Wall Street giant to take over the discount broker come as he continues his efforts to reach the “common man.”
For the e-broker, the deal will make her better placed to face her rivals after a turbulent year in which companies did their best to scrap customers by scrapping fees and two of its larger competitors announced a merger.
The acquisition of all shares, called Project Eagle, has been agreed at $ 58.84 per share and is expected to close in the fourth quarter.
Morgan Stanley Chairman and CEO James Gorman (left) and E * Trade CEO Michael Pizzi (right). The acquisition of all shares, called Project Eagle, has been agreed at $ 58.84 per share and is expected to close in the fourth quarter
Morgan Stanley will take out the five million private customers of E * Trade, their $ 360 billion in assets and its online bank with cheap deposits.
This will bring Morgan Stanley’s portfolio to more than 4,000 corporate clients and $ 580 billion worth of shares for their employees.
The activities of E * Trade are expected to remain largely the same, with CEO Michael Pizzi, the E * Trade brand, its stores and distinctive advertising campaigns.
The news marks Morgan Stanley’s latest trick for leaving his rich roots behind and appealing to the ordinary person on the street.
The two companies currently have largely polar opposing business models, with discount and online broker E * Trade reaching the normal person and Morgan Stanley’s human advisors have long made the company a banker of choice among the millionaire set.
Morgan Stanley has taken steps to focus on the average Joe of recent times and in 2019 launched an online-only tool for less wealthy customers.
Chairman and CEO James Gorman said in a statement that this latest step will now accelerate the expansion of his asset management arm.
The Wall Street giant’s plans to take over the discount broker come as it continues its efforts to reach the “common man”
For discount broker E * Trade, the deal will be better positioned to meet its rivals after a turbulent year in which companies had to search for customers by scrapping rates and two of its larger competitors announced a merger
“E-commerce offers exceptional growth potential for our asset management activities and a leap forward in our asset management strategy,” he said.
“The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, and at the same time creates a leading workplace power provider for companies and their employees.”
“We are recording Schwab. We’re incorporating Fidelity, “Gorman said The Wall Street Journal.
“This is not about building up inheritance; it’s about getting [Morgan Stanley] ready for prime time. ”
He added that E * Trade also offers an opportunity to take Morgan Stanley’s asset management department internationally.
Gorman has led a major turnaround in the bank since the helm went back in 2010.
WHAT IS E * TRADE?
E * Trade is a discount broker that manages money for ordinary people.
It became an important concept in the late 1990s when it grew out of the back of dot-com day traders.
The discount model continues to work invest the inactive cash that customers leave in their accounts.
It manages the stock that employees receive as part of their wages, locks them before they are moved to securities accounts.
E * Trade is known for its E * Trade Baby advertising campaigns. The ads show a baby talking about finances to show how easy it is to use the online bank.
The loss of risky trading options and the expansion of its asset management arm helped the company to stabilize and reached a record revenue of $ 41 billion last year.
This latest acquisition also follows the acquisition of Solium last year for $ 900 million.
The deal also comes at a good time for E * Trade, after a cost war between discount brokers and a shock merger between two rivals last year threatened to derail the company.
In October, one of his biggest competitors, Charles Schwab, announced it was scrapping customer rates for online US stock trading.
Charles Schwab then announced in November that it was merging with TD Ameritrade Holding Corp.
The news sent the E * Trade share price down.
While E * Trade was forced to follow in the footsteps of Charles Schwab and switch to a $ 0 commission model for online transactions, many on Wall Street thought that the future of the company could be jeopardized and that an acquisition of Morgan Stanley or Goldman Sachs could place the cards.
Today’s announcement is the biggest deal from a major player since the 2008 financial crisis stirred Wall Street and left the banks cautious with such large investments.
There are other recent signs of renewed confidence with large companies, with Goldman Sachs building an online retail bank.