E*Trade Shareholders Approve Morgan Stanley Acquisition
Morgan Stanley’s bid to expand its brokerage services to a younger, less affluent cohort of investors advanced on Friday when E*Trade Financial Corp. said its shareholders approved a merger with the wirehouse.
The acquisition should add about $3 billion of revenue to Morgan Stanley’s top line, Chairman and Chief Executive James Gorman told analysts on Thursday, courtesy of E*Trade’s popularity with online investors, its business servicing workplace shareholder accounts, its online bank franchise and its small custody business for customers of registered investment advisors.
“They have a terrific brand for a younger generation of investors,” Gorman said. “They have a terrific brand for more active trader investors and options trading investors.”
E*Trade’s performance during the volatility and work-at-home strictures of the Covid-19 economy reinforced Morgan Stanley’s commitment to the deal, as the discount brokerage added hundreds of thousands of new accounts and billions of dollars that Gorman characterized as “real money, not just kids playing.”
Morgan Stanley Chief Financial Officer Jonathan Pruzan applauded its prospective partner’s technological prowess. “The plant has held up very well,” he said. “The technology is excellent. They’ve had no hard outages.”
Morgan Stanley’s brokers and clients have experienced some technology glitches during the lockdown period, including a four-hour outage in late March that prevented normal order-routing.
The deal, expected to close in the fourth quarter, subject to final regulatory approval, also will improve Morgan Stanley’s capital ratios and create expense efficiencies across the two firms’ platforms, Gorman said.
Morgan Stanley announced its $13 billion all-stock deal in February, three months after Charles Schwab Corp. said it would pay $26 billion to purchase TD Ameritrade.
In a proxy filing last month, E*Trade disclosed that shareholders had filed nine lawsuits against the firm and its directors to block the merger over allegations that merger details disclosed were incomplete and misleading.
E*Trade believes the claims are “without merit,” the filing said. The so-called “moot suits” are often filed to induce a settlement.
Charles Schwab and TD Ameritrade in May settled similar “moot suits,” agreeing to issue additional merger documentation. Their regulatory filings said suits were withdrawn and did not discuss monetary terms.