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Feb 20, 2020

Morgan Stanley to buy E*Trade for US$13 billion in all-stock deal

Morgan Stanley to acquire E*Trade amid wave of online brokerage deals


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Morgan Stanley agreed to buy E*Trade Financial Corp. for US$13 billion, adding the retail brokerage to its Wall Street powerhouse and continuing the industry’s consolidation.

The all-stock takeover adds E*Trade’s US$360 billion of client assets to Morgan Stanley’s US$2.7 trillion, the companies said Thursday in a statement. Morgan Stanley also gets E*Trade’s direct-to-consumer and digital capabilities to complement its full-service, advisory-focused brokerage.

“E*Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy,” Chief Executive Officer James Gorman said in the statement. “This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue.”

E*Trade last month posted worse-than-expected earnings in a quarter when the online brokerage was forced to slash trading fees and two of its biggest competitors agreed to merge.

The race to commission-free trading has shaken up the discount brokerage industry, with E*Trade rival Charles Schwab Corp. announcing it was eliminating trading commissions for U.S.-listed stocks, exchange-traded funds and options, and then agreeing to buy competitor TD Ameritrade Holding Corp.

E*Trade stockholders will receive 1.0432 Morgan Stanley shares for each of their shares, valued at US$58.74 based on Wednesday’s closing price.

Morgan Stanley slumped in early trading, dropping 4.5 per cent to US$53.75 at 7:39 a.m. in New York. E*Trade surged 6.8 per cent to US$48.