TD Ameritrade announced on Monday that it would acquire Scottrade Financial Services, a rival discount brokerage, for $4 billion, in a bid for scale at a time when small investors are losing their taste for stock trading.
The deal would give TD Ameritrade $944 billion in client assets and 10 million accounts, and it would more than quadruple the size of its branch network.
“This combination will allow us to leverage our strengths and increase our scale, further accelerate our asset gathering capabilities and introduce our award-winning lineup of trading tools, products and education services to millions of new investors,” Tim Hockey, the TD Ameritrade president and chief executive, said in a news release.
After the merger, Rodger Riney, the Scottrade founder and chief executive, would join TD Ameritrade’s board.
“Joining forces will enable us to offer clients an expanded array of trading tools, enhanced education resources and advanced option capabilities with broader geographic reach,” Mr. Riney said. “Together, we will be well-positioned to compete in today’s rapidly evolving financial services industry.”
The deal is expected to take place in two parts, with TD Bank Group, one of TD Ameritrade’s largest shareholders and a subsidiary of Toronto-Dominion Bank in Canada, first acquiring Scottrade Bank from Scottrade Financial Services for $1.3 billion in cash and merging it with its banking unit. TD Bank Group also would purchase $400 million in shares from TD Ameritrade.
Then, TD Ameritrade would acquire the privately held Scottrade Financial Services for $2.7 billion, including $1.7 billion in cash and $1 billion in shares, TD Ameritrade said.
The transaction is subject to regulatory approval and is expected to close by the end of September 2017.
Barclays and the law firm Wachtell, Lipton, Rosen & Katz advised TD Ameritrade. Goldman Sachs and the law firm Sullivan & Cromwell advised Scottrade.