Morgan Stanley to acquire E-TRADE for $13 billion

Morgan Stanley and E-TRADE Financial Corporation have entered into a definitive agreement under which Morgan Stanley will acquire E-TRADE, a financial services company and pioneer in the online brokerage industry, in an all-stock transaction valued at approximately $13 billion. The combination will significantly increase the scale and breadth of Morgan Stanley’s Wealth Management franchise, and positions Morgan Stanley to be an industry leader in Wealth Management across all channels and wealth segments.

E-TRADE has over 5.2 million client accounts with over $360 billion of retail client assets, adding to Morgan Stanley’s existing 3 million client relationships and $2.7 trillion of client assets. Morgan Stanley’s full-service, advisor-driven model coupled with E-TRADE’s direct-to-consumer and digital capabilities, will allow the combined business to have “best-in-class product and service offerings” to support the full spectrum of wealth.

The acquisition marks a continuation of Morgan Stanley’s effort to rebalance the firm’s portfolio of businesses so that a greater percentage of firm revenues and income are derived from balance sheet light and more durable sources of revenues. Upon integration, the combined Wealth and Investment Management businesses will contribute approximately 57% of the Firm’s pre-tax profits, excluding potential synergies, compared to only approximately 26% in 2010.

“E-TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy. 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. E-TRADE’s products, innovation in technology, and established brand will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace. In addition, 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, Chairman and CEO of Morgan Stanley.

“Since we created the digital brokerage category nearly 40 years ago, E-TRADE has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders, and stock plan administrators. By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities. Bringing E-TRADE’s brand and offerings under the Morgan Stanley umbrella creates a truly exciting wealth management value proposition and enables our collective team to serve a far wider spectrum of clients.” – Mike Pizzi, CEO of E-TRADE.

The acquisition is subject to customary closing conditions, including regulatory approvals and approval by E-TRADE shareholders, and is expected to close in the fourth quarter of 2020.