ST. LOUIS -- Discount brokerage Scottrade is being acquired by rival TD Ameritrade for $4 billion.
The companies announced the deal early Monday, after several weeks of news reports about the merger. The sale is subject to regulatory approvals and is scheduled to close by Sept. 30, 2017. Scottrade will convert to TD Ameritrade systems in 2018.
Combined, the two companies have $944 billion in total client assets and 10 million funded client accounts.
"It gives us a lot of power to combine the two," Scottrade's founder and Chief Executive Officer Rodger Riney told the St. Louis Post-Dispatch on Monday. Riney will join TD Ameritrade's board of directors when the sale is final. "It is a business that has become ever more competitive as the years have gone by ... and scale is more important than ever. The more clients you have, the less expensively you can offer services to clients."
Scottrade has 3,700 employees companywide, including about 1,800 in the St. Louis region, where it is based.
Omaha, Neb.-based TD Ameritrade said it expects to realize $450 million in combined annual expense synergies and more than $300 million in additional long-term opportunities. Savings will come in part from headcount reductions as the combined company shutters about 150 branches.
Scottrade has 1,000 investment consultants and 500 branches, but has not yet identified which locations may close.
The acquisition -- the largest in TD Ameritrade's history -- more than quadruples the size of its branch network, which currently totals about 100. Even as customers gravitate to online services, there's still demand for in-person conversations with knowledgeable employees, TD Ameritrade's president and CEO Tim Hockey said Monday.
"Even though everyone is enamored about talking about technology, managing trading and wealth are very important conversations and [customers] want to talk to someone they know and trust in their community," Hockey said.
"Scottrade clients will get the benefit of deeper education solutions and more products," Hockey said. "This gives us a lot more scale which will allow us to invest in more innovations."
The deal will occur in two steps: TD Bank Group is buying Scottrade's banking arm, Scottrade Bank, for $1.3 billion, and the bank will merge will merge into TD Bank NA, a subsidiary of Toronto-based Toronto-Dominion Bank, TD's largest investor. After that transaction, TD Ameritrade will acquire Scottrade Financial Services for $2.7 billion.
TD Ameritrade was founded in 1975 as First Omaha Securities, the first company to offer discount stock trades. It has 7 million accounts and $774 billion in client assets.
Scottrade, which has $170 billion in client assets and more than 3 million accounts, was founded by Riney as Scottsdale Securities in Scottsdale, Ariz., in 1980. A year later, Riney opened the company's second branch in the St. Louis area.
Riney relocated the headquarters to St. Louis County in 1985. When it started its website in 1996, the company was among the first to offer online trading. The company chose Scottrade.com as its home page because Scottsdale.com was already taken.
The company, renamed Scottrade in 2000, had $1.11 billion in annual revenue in 2015. Its four business lines are brokerage, investment adviser services, banking and investment management.
Riney, 70, announced last fall that he had multiple myeloma, a form of blood cancer. His health issues are well under control, Riney said, but played a factor in the company's decision to sell after decades of operating as an independent, privately held firm.
Riney said he decided not to take the company public and turned down multiple offers by potential suitors over the years because the company was happy being independent.
"It seemed like the right time," Riney said of Monday's sale announcement, noting that the two companies were founded within a few years of each other and share similar operating philosophies. "After a thorough process, we realized that TD Ameritrade would be the best partner for our associates and clients," he added.
"We break our backs to give great customer service and TD Ameritrade does the same," Riney continued. "Between the two of us, we have about 80 years of brokerage experience."
After the finalization of the merger, the Scottrade name will be phased out, including at the Scottrade Center arena downtown, home of the National Hockey League's St. Louis Blues. The arena's name will be changed to TD Ameritrade Center, Hockey said. The contract for the naming rights runs through 2021. "We'll be talking to the owners of Scottrade Center," he said.
TD Ameritrade's acquisition comes amid consolidation in the industry. Already this year, discount brokerage E-Trade Financial Corp. announced plans to acquire OptionsHouse for $725 million and Ally Financial finalized its acquisition of digital wealth management company TradeKing Group for $275 million.
Business on 10/25/2016