Two well-known financial institutes – TD Ameritrade Holding Corp. and its largest stakeholder, Toronto-Dominion Bank, are getting closer to a deal to buy online brokerage Scottrade Financial Services Inc. for $4 billion, according to sources.
According to the deal, TD Ameritrade would acquire Scottrade’s brokerage operations for about $2.7 billion in cash and stock, while Toronto-Dominion would purchase Scottrade’s banking operations for $1.3 billion in cash. The transaction would combine two of the largest online brokerages, an industry under pressure from lower trading volumes and sluggish revenue growth. Such platforms are used by consumers, wealth advisers and other investors to trade securities outside of traditional brokerages.
Bloomberg reported last month that Scottrade, based in Town & Country, Missouri, was working with an adviser to explore a sale. The St. Louis Business Journal reported the pending agreement on Saturday.
Spokeswomen for Toronto-Dominion Bank and Omaha, Nebraska-based TD Ameritrade declined to comment Sunday, and a Scottrade representative didn’t respond to messages sent outside of normal business hours.
Toronto-Dominion, Canada’s second-biggest bank by assets, owns about 42 percent of TD Ameritrade, qualifying it as a non-bank subsidiary under U.S. regulations. TD Ameritrade has a market value of $19.5 billion. Closely held Scottrade had $1.04 billion of revenue in 2015, Wells Fargo & Co. analysts led by Christopher Harris wrote in a report this month.
TD Ameritrade reported an average of 425,000 client trades per day in August, down 21 percent from a year earlier. E*Trade said its comparable key industry statistic fell 20 percent in August to 143,831. The Scottrade deal would add to Toronto-Dominion’s earnings per share in the low-single digits and to its U.S. base of earnings, Robert Sedran, an analyst with Canadian Imperial Bank of Commerce, said last week. TD Ameritrade is scheduled to report fiscal fourth-quarter results on Tuesday.
Scottrade Chief Executive Officer, Rodger Riney, who co-founded the discount brokerage in 1980, will join the TD Ameritrade board as part of the deal, said the people with knowledge of the matter. Riney’s 75 percent stake is valued at $2.2 billion, according to the Bloomberg Billionaires Index. The company announced last year that he was undergoing treatment for multiple myeloma, a form of blood cancer.
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