TD Ameritrade to buy St. Louis area based Scottrade, reduce workforce

Online brokerage TD Ameritrade is buying Scottrade in a $4 billion cash-and-stock deal that would significantly expand its branch network at a time when many financial firms are expanding automated adviser programs. However, TD Ameritrade's scale should allow it to extract significant cost savings from the merger, enhancing its profitability and reducing its cash flow leverage.

TD Ameritrade's CEO Tim Hockey said he believed regulators would look at the deal "fairly". Toronto-Dominion Bank, TD's largest shareholder, is acquiring Scottrade Bank for US$1.3 billion in a deal that will expand its United States operations.

The combined company will have 600,000 average client trades per day, and $944 billion in client assets, the Wall Street Journal reported.

The deal is expected to close in September 2017, with Barclays and Goldman Sachs acting as advisers for Ameritrade and Scottrade respectively.

Toronto-Dominion Bank is the largest shareholder in TD Ameritrade.

Scottrade Founder and CEO Rodger Riney confirmed the deal in a letter to clients, posted on the company's website. Shares in Ameritrade fell 1% in thin premarket trading. Scottrade customers would benefit from that wider selection, as well as from TD Ameritrade's innovative trading platforms for desktop, web and mobile investing. This year clients ranked the brokerage "Highest in Investor Satisfaction with Self-Directed Services" in the J.D. Power 2016 U.S. Self-Directed Investor Satisfaction Study. Subject to completion of the acquisitions, TD and TD Ameritrade have agreed that TD will accept sweep deposits from Scottrade clients.

TD Ameritrade said it expects an additional $300 million in "longer-term opportunities", without offering specifics. "After a thorough process, we realized that TD Ameritrade would be the best partner for our associates and clients", he added.

It's possible Scottrade could've been up for sale because the 70 year-old Riney was diagnosed with cancer last year.

Barclays Capital serving as financial advisor to TD Ameritrade, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to TD Ameritrade.

  • Zachary Reyes