Morgan Stanley To Acquire E*TRADE In $13 Bln All-stock Deal – Quick Facts

Banking major Morgan Stanley (MS) agreed Thursday to acquire financial services company E*TRADE Financial Corp. (ETFC) in an all-stock transaction valued at approximately $13 billion.

Under the terms of the agreement, E*TRADE stockholders will receive 1.0432 Morgan Stanley shares for each E*TRADE share, which represents per share consideration of $58.74 based on the closing price of Morgan Stanley common stock on February 19, 2020.

The combination will significantly increase the scale and breadth of Morgan Stanley’s Wealth Management franchise, and position Morgan Stanley to be an industry leader in Wealth Management across all channels and wealth segments.

This will position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace. It will also create a premier Workplace Wealth provider for corporations and their employees.

E*TRADE has over 5.2 million client accounts with over $360 billion of retail client assets, adding to Morgan Stanley’s existing 3 million client relationships and $2.7 trillion of client assets.

Mike Pizzi, CEO of E*TRADE, will be joining Morgan Stanley and will continue to run the E*TRADE business within the Morgan Stanley franchise and lead the ongoing integration effort. Pizzi will report to Morgan Stanley Chairman and CEO James Gorman and will join the Morgan Stanley Operating and Management Committees. In addition, Morgan Stanley will invite one of E*TRADE’s independent directors to join its Board.

Upon integration, the combined Wealth and Investment Management businesses will contribute approximately 57% of the Firm’s pre-tax profits, excluding potential synergies, compared to only approximately 26% in 2010.

Shareholders from both companies will benefit from potential cost savings estimated at approximately $400 million from maximizing efficiencies across the company, and potential funding synergies of approximately $150 million from optimizing E*TRADE’s approximate $56 billion of deposits.

Morgan Stanley expects the acquisition to be accretive once fully phased-in estimated cost and funding synergies are realized.

The acquisition is subject to customary closing conditions, including regulatory approvals and approval by E*TRADE shareholders, and is expected to close in the fourth quarter of 2020.

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