TD Ameritrade (and TD Bank) Will Buy Scottrade in $4 Billion Deal

TD AmeritradeDiscount [online] brokerage firm TD Ameritrade is apparently in talks to buy rival Scottrade. The deal is reportedly worth $4 billion. Announced on Monday (by both companies), this move will quadruple the size of TD Ameritrade’s branch network. After all, Scottrade is measurably smaller in number of client accounts and assets; however, the company has far more branches (nearly five times as many). With the deal, TD Ameritrade also plans to close roughly 150 of these combined branches.

The move, announced Monday by both companies, will allow TD Ameritrade to quadruple the size of its branch network, to about 450.

“That doesn’t necessarily mean fewer investment consultants. It just means fewer buildings,” explains TD Ameritrade spokeswoman Kim Hillyer. She does go on to note that the company may have to cut between 500 and 1,000 jobs because of the combination venture. That could be as much as 10 percent of the combined workforce (as TD Ameritrade has roughly 6,000 employees and Scottrade has roughly 3,700).

Most importantly, of course, TD Ameritrade expects to save approximately $450 million every year as a result of reduced spending on advertising, operations, and technology.

In preparation for market response, TD Ameritrade CEO Tim Hockey comments that the deal will leave the combined business in a good place to compete compete and will give them appropriate opportunity to respond to any potential price wars over commissions accelerates.

He shares, “We certainly believe the regulators will look fairly at this deal and will opine,” but “I still think this is a considerably competitive marketplace, that’s for sure. There are lots of opportunities for additional competitors to get into our space and continue to drive price competition.”

TD Bank has already been making aggressive expansions in the United States, with support for growing both its retail and its investment banking divisions. Looking to diversify from its home market, the company has already grown to be among the 10 biggest banks in America; with more 1,300 branches across the country.

In response to the potential closing of nearly 25 percent of their combined locations, Hockey continues, “Once we’ve identified where there are overlaps in current locations we expect to settle at around 450.”

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