TD Ameritrade Holding Corp. and its largest stakeholder, Toronto-Dominion Bank, agreed to buy Scottrade Financial Services Inc. for $4 billion, combining two of the largest online brokerages while expanding the U.S. operations of Canada’s second-largest lender.
TD Ameritrade agreed to acquire Scottrade’s brokerage operations for about $2.7 billion. Toronto-Dominion, which owns about 42 percent of TD Ameritrade, will purchase Scottrade’s banking operations for $1.3 billion, adding to its U.S. branch network that stretches from Maine to Florida, including locations in the Carolinas.
The acquisition of Scottrade adds to a flurry of recent deals in an industry that’s facing pressure from lower trading volumes and sluggish revenue growth. E*Trade Financial Corp. bought Aperture New Holdings Inc., parent of the futures and options trading platform OptionsHouse, in a $725 million cash deal in July, and Ally Financial Inc. purchased TradeKing Group Inc. for about $275 million a month earlier.
Toronto-Dominion extends its U.S. acquisition streak with this deal. The Toronto-based bank has spent more than $17 billion building a U.S. branch network since 2005 and has sought to fortify its wealth management business since buying New York money manager Epoch Investment Partners in 2013 to attract more wealthy American clients. The lender has more recently focused on buying credit-card portfolios, though Chief Executive Officer Bharat Masrani said as recently as September that he’s still interested in “tuck-in acquisitions” and other U.S. assets if they make strategic sense.
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TD Ameritrade, based in Omaha, Nebraska, has a market value of $19.5 billion. Closely held Scottrade, based in Town & Country, Missouri, had $1.04 billion of revenue in 2015, Wells Fargo & Co. analysts led by Christopher Harris said in a report this month.
Online platforms are used by consumers, wealth advisers and other investors to trade securities outside of traditional brokerages. The brokerages have been squeezed in recent years amid competition from automated investment systems known as robo-advisers and a shift away from stock picking and day-trading toward passive vehicles.
TD Ameritrade was created in January 2006 when the former Ameritrade Holding Corp. bought Toronto-Dominion’s U.S. network of independent advisers, TD Waterhouse. In exchange, the bank received a large stake in the combined firm. The companies have maintained close business ties. Last year, Tim Hockey left the Toronto-based lender, where he ran Canadian banking and wealth management, and became TD Ameritrade’s CEO.