Schwab-TD Ameritrade deal surpasses milestones

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After months of inquiry, the Department of Justice closed its antitrust investigation into Charles Schwab’s anticipated acquisition of TD Ameritrade, according to Schwab.

Schwab CEO Walt Bettinger said in a statement he was “pleased to be clearing an important milestone.”

Shareholders at both companies voted in favor of the acquisition later on June 4 and Schwab expects the deal to close in the second half of the year.

The proposed acquisition would bring together two of the industry’s largest RIA custodians; Schwab and TD Ameritrade have over 7,500 and 7,000 RIAs on their platform, respectively, and the combined entity would service about 24 million client accounts and more than $5 trillion in assets.

As part of its investigation, the Justice Department had sought additional information from both companies as well as other custodians and at least one advisor over potential antitrust concerns.

“This is really the first time the DOJ is examining our industry,” Tom Nally, head of TD Ameritrade’s custodial division, told advisors during the company’s annual conference in January, when he announced that the “vast majority” of client accounts wouldn’t have to be repapered.

The deal is expected to close even as the coronavirus pandemic has left stock prices sagging and many of the two companies’ employees working from home.

A Schwab spokesman told Financial Planning in April that the current environment hadn’t changed any of the company’s assumptions with regard to potential risks to the deal.

Schwab has said it estimates the integration will take approximately 18 to 36 months and that it will cost $1.6 billion over a three-year period.

Chris Shutler, an analyst at William Blair, wrote in an equity research note June 4 that he maintains an outperform rating on Schwab’s stock, even as “interest rate headwinds remain substantial and we worry that equity markets have rebounded too much too fast.”

The deal “enhances Schwab’s competitive positioning and long-term growth rate,” although there are risks including interest rates, markets, deal integration and a “rapidly evolving competitive landscape,” Shutler writes.

Schwab said in a statement that the acquisition remains subject to “the customary closing conditions set forth in the merger agreement, including receipt of other regulatory approvals.”

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Clearinghouses/custodians M&A Charles Schwab TD Ameritrade Walt Bettinger DoJ RIAs
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