Morgan Stanley to buy online-brokerage giant E-Trade for $13 billion
- Morgan Stanley agreed on Thursday to acquire the online brokerage E-Trade for $13 billion in an all-stock transaction.
- The takeover will help Morgan Stanley offer self-service and workplace services to clients, the company said in a statement.
- The $360 billion of client assets currently held by E-Trade will be added to Morgan Stanley's existing $2.7 trillion.
- The acquisition comes after E-Trade slashed commissions to zero last year, in a move that followed Charles Schwab.
- E-Trade's stock skyrocketed 24% in premarket trading before being halted. Morgan Stanley slipped more than 4%.
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Morgan Stanley will acquire online-brokerage giant E-Trade for $13 billion in an all-stock transaction, the bank announced Thursday in a press release.
E-Trade shareholders will get 1.0432 shares of Morgan Stanley stock for each unit they hold, the release said. The $360 billion of client assets currently held by E-Trade will be added to Morgan Stanley's existing $2.7 trillion.
The takeover is a bid to expand the reach of Morgan Stanley's wealth management business to more retail clients, according to the release. While Morgan Stanley oversees far more money, E-Trade's 5.2 million client accounts handily outpace Morgan Stanley's 3 million.
"This continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasizing more durable sources of revenue," James Gorman, the CEO of Morgan Stanley, said in a statement.
In recent years, many of Wall Street's largest banks have pivoted towards more predictable sources of revenue, like wealth management and retail banking, as a counter-weight to more revenue-volatile businesses like sales and trading.
Wealth and investment management businesses will comprise about 57% of pre-tax profits after the acquisition, versus 26% in 2010, the statement said.
The deals comes after Charles Schwab rattled the brokerage industry last fall, after announcing it would not charge fees on online trades. That kicked off a price war among brokerages, with E-Trade among the online brokers that followed suit and cut commissions to zero.
"The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees," Gorman said, adding that the acquisition will allow Morgan Stanley clients to manage their wealth through financial advisory, self-directed, or workplace channels.
Mike Pizzi, CEO of E-Trade, will continue to run the business under Morgan Stanley's auspices, and one of E-Trade's independent directors will join the Morgan Stanley board of directors.