Morgan Stanley is set to buy an online trading platform Etrade for $13 billion. The deal marks the largest bank acquisition since the 2008 financial crisis.
The acquisition will allow Morgan Stanley to tap into Etrade’s 5.2 million retail investors, media reports said. The bank’s latest move is aimed at diversifying its revenue stream. Etrade acquisition will encourage Morgan Stanley to improve efficiency in money, savings and asset management of small investors.
Under the terms of the deal, Morgan Stanley will pay Etrade $58.74 a share in stock, and the agreement combines client assets worth nearly $3.1 trillion, media reports said. However, the transaction is subject to regulatory approval. The bank’s executives are confident that the deal would receive regulatory approval.
Devin Ryan, JMP Securities managing director of equity research, told the media, “There’s a longer-term strategic play here around the digital opportunity and acquiring new corporate service customers and getting a higher percentage of their wallet over time. Etrade has nearly 2 million corporate stock plan customers and so this strategically widens the potential opportunity for Morgan Stanley to convert those customers.”
Morgan Stanley will face a $525 million termination fee if it cancels the deal on the back of antitrust issues, media reports said. The bank is expected to close the deal by the fourth quarter.
Etrade is a US-based brokerage firm, headquartered in California. The firm offers financial services to small clients. It is reported to have five million clients with assets valued at $360 billion.