Charles Schwab is buying TD Ameritrade for US$26 billion, according to FOX Business‘ Maria Bartiromo, who earlier today cited exclusive sources when making the announcement.
Bartiromo also said the deal was finalised last evening and could be announced sometime today.
With the announcement of the acquisition, Bloomberg News reported that TD Ameritrade shares soared while Charles Schwab’s peaked at a higher rate.
“Shares in Charles Schwab reversed an earlier decline in pre-market trading and are up 2.4 per cent, while TD Ameritrade reduced some of the earlier gains and is up 17 per cent,” Bloomberg News informed.
A deal of this kind would create a firm with roughly US$5 trillion in assets under management, once both financial institutions have been merged.
If confirmed, the acquisition would come after TD Ameritrade CEO Tim Hockey acknowledged that his company’s decision to adopt zero commissions — similar to Charles Schwab and rivals e-Trade and Fidelity — would fuel speculation about mergers.
According to Bloomberg News, the brokerage industry has been under pressure from a “price war that escalated when Schwab last month announced plans to eliminate commissions for US stocks, exchange-traded funds and options.
“The move forced other brokerages to follow suit and triggered a slump in the shares of such firms, with TD Ameritrade among the hardest hit,” the report continued.
Charles Schwab’s shares have risen 7.8 per cent in value this year, giving the company total market capitalisation of US$57 billion.
TD Ameritrade, on the other hand, has fallen 15.5 per cent, with the company now valuing US$22 billion. In fact, the company has lost 11 per cent of its value in shares since it announced the elimination of commissions.
Charles Schwab CEO Walter Bettinger has been tapped to lead the merged entity, it has been reported. In the meantime, TD Ameritrade Chief Financial Officer Steve Boyle will lead the target company until the deal is completed.
In July, TD Ameritrade CEO and President Tim Hockey announced he will leave the brokerage firm in February, next year.