TD Ameritrade reached a deal to acquire rival stock brokerage firm Scottrade for a mix of cash and stock that the companies said was worth $4 billion.
The agreement involves multiple transactions in which TD Ameritrade will first acquire Scottrade Bank for $1.3 billion, then acquire Scottrade Financial Services for $2.7 billion.
Collectively, the companies handled an average of 600,000 client trades per day, $944 billion in client assets and 10 million funded client accounts in the 12 months ended Sept. 30.
“We are confident we have found a great partner in TD Ameritrade, who shares our client-first focus. 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,” Rodger Riney, Scottrade founder and chief executive officer said. “Together, we will be well-positioned to compete in today’s rapidly evolving financial services industry.”
TD Ameritrade said the deal "adds significant scale to its retail business, extends its leadership in trading and more than quadruples the size of its branch network."
The companies are expected to make significant cuts, including shuttering about 150 of their collective 600 branches, according to a presentation prepared for investors.
To squeeze out excess costs, they'll rack up $550 million in "restructuring related charges," including costs associated with employee severance, according to the presentation.
The company said it had identified the opportunity for $450 million in annual "expense synergies," which often includes cost cuts and combined purchasing power in corporate mergers, including 25% that can be achieved within the first year of the deal. The rest would occur in the second year.
TD Ameritrade said it expects an additional $300 million in "longer-term opportunities," without offering specifics.
The companies said they expect the deal to close by the end of September 2017.
TD Ameritrade shares (AMTD) rose 0.3% in pre-market trading to $37.20.
You can read the full press release from TD Ameritrade below: