• Combined platforms will have $3.1Tn client assets, 8.2MM
retail client relationships and accounts, and 4.6MM stock plan
participants
• Combination increases Wealth Management scale, fills
product and services gaps through complementary offerings, and
enhances digital capabilities; positions Morgan Stanley as a top
player across all three channels: Financial Advisory, Workplace,
and Self-Directed
• Significant cost and funding synergies will result in
stronger financial performance and shareholder value creation
• Combination accelerates Morgan Stanley’s transition to a
more balance sheet light business mix and more durable sources of
revenue
Morgan Stanley (NYSE: MS) and E*TRADE Financial Corporation
(NASDAQ: ETFC) have entered into a definitive agreement under which
Morgan Stanley will acquire E*TRADE, a leading financial services
company and pioneer in the online brokerage industry, in an
all-stock transaction valued at approximately $13 billion. Under
the terms of the agreement, E*TRADE stockholders will receive
1.0432 Morgan Stanley shares for each E*TRADE share, which
represents per share consideration of $58.74 based on the closing
price of Morgan Stanley common stock on February 19, 2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20200220005462/en/
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.
“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,” said James Gorman, Chairman and CEO
of Morgan Stanley. “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.”
“Finally, I am delighted that Mike Pizzi, CEO of E*TRADE, will
be joining Morgan Stanley. Mike will continue to run the E*TRADE
business within the Morgan Stanley franchise and lead the ongoing
integration effort. Mike will report to me and will join the Morgan
Stanley Operating and Management Committees. In addition, we will
invite one of E*TRADE’s independent directors to join our Board. We
look forward to welcoming the infusion of management and technology
talent that E*TRADE will bring to 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,” said Mike Pizzi, Chief Executive
Officer of E*TRADE. “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.”
The transaction will create a leading player in Workplace
Wealth, combining E*TRADE’s leading U.S. stock plan business with
Shareworks by Morgan Stanley, a top provider of public stock plan
administration and private cap table management solutions. This
combination will enable Morgan Stanley to accelerate initiatives
aimed at enhancing the workplace offering through online brokerage
and digital banking capabilities, providing a significantly
enhanced client experience.
E*TRADE has been a pioneer in the digital brokerage and banking
space for nearly 40 years and is an iconic brand. E*TRADE’s
hallmarked, consumer-facing technology platforms will complement
Morgan Stanley’s leading advisor-facing technology. E*TRADE also
provides a full suite of digital banking services, including direct
integration with brokerage accounts, checking and high-yield
savings accounts, significantly accelerating Morgan Stanley’s
digital banking efforts. The transaction adds approximately $56
billion of low-cost deposits, which will provide significant
funding benefits to Morgan Stanley.
Importantly, the acquisition marks a continuation of Morgan
Stanley’s decade-long 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.
The transaction provides significant upside potential for
shareholders of both Morgan Stanley and E*TRADE. Shareholders from
both companies will benefit from potential cost savings estimated
at approximately $400 million from maximizing efficiencies of
technology infrastructure, optimizing shared corporate services and
combining the bank entities, as well as potential funding synergies
of approximately $150 million from optimizing E*TRADE’s approximate
$56 billion of deposits. In addition, Morgan Stanley will have
enhanced technology and service capabilities to capture a larger
portion of the estimated approximate $7.3 trillion of combined
current customer assets held away, which will drive significant
revenue opportunities.
Morgan Stanley will be better positioned to generate attractive
financial returns through increased scale, improved efficiency,
higher margins, stronger returns on tangible common equity, and
long-term earnings accretion. Morgan Stanley expects the
acquisition to be accretive once fully phased-in estimated cost and
funding synergies are realized. Morgan Stanley will maintain its
strong capital position, with the Firm’s common equity tier 1 ratio
estimated to increase by over 30bps at closing. The transaction is
expected to increase the Firm’s return on tangible common equity by
more than 100bps with fully phased-in cost and funding synergies
and improve Wealth Management’s pre-tax profit margin to over
30%.
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.
A conference call to discuss the announced transaction will be
held today at 8:30 a.m. ET, hosted by Morgan Stanley Chairman and
CEO, James Gorman; Morgan Stanley CFO, Jonathan Pruzan; and E*TRADE
CEO, Michael Pizzi. The call and presentation will be available at
www.morganstanley.com or by dialing 1-877-895-9527 (domestic) and
1-706-679-2291 (international); the passcode is 5097722. To listen
to the playback, please visit our website or dial: 1-855-859-2056
(domestic) or 1-404-537-3406 (international); the passcode is
8469949.
About E*TRADE
E*TRADE Financial and its subsidiaries provide financial
services including brokerage and banking products and services to
traders, investors, stock plan administrators and participants, and
registered investment advisers (RIAs). Securities products and
services are offered by E*TRADE Securities LLC (Member FINRA/SIPC).
Commodity futures and options on futures products and services are
offered by E*TRADE Futures LLC (Member NFA). Managed Account
Solutions are offered through E*TRADE Capital Management, LLC, a
Registered Investment Adviser. Bank products and services are
offered by E*TRADE Bank, and RIA custody solutions are offered by
E*TRADE Savings Bank, both of which are federal savings banks
(Members FDIC). Employee stock and student loan benefit plan
solutions are offered by E*TRADE Financial Corporate Services, Inc.
More information is available at https://us.etrade.com/.
About Morgan Stanley
Morgan Stanley is a leading global financial services firm
providing a wide range of investment banking, securities, wealth
management and investment management services. With offices in more
than 41 countries, the Firm’s employees serve clients worldwide
including corporations, governments, institutions and individuals.
For further information about Morgan Stanley, please visit
www.morganstanley.com.
Important Information about the Transaction and Where to Find
It
In connection with the proposed transaction Morgan Stanley and
E*TRADE (“E*TRADE”), Morgan Stanley and E*TRADE will file relevant
materials with the Securities and Exchange Commission (the “SEC”),
including a Morgan Stanley registration statement on Form S-4 that
will include a proxy statement of E*TRADE that also constitutes a
prospectus of Morgan Stanley and a definitive proxy
statement/prospectus will be mailed to stockholders of E*TRADE.
BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND
SECURITY HOLDERS OF Morgan Stanley AND E*TRADE ARE URGED TO READ
THE REGISTRATION STATEMENT, THE PROXY STATEMENT/PROSPECTUS AND ANY
OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE
SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS,
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security
holders may obtain free copies of the registration statement and
the proxy statement/prospectus (when they become available), as
well as other filings containing information about Morgan Stanley
or E*TRADE, without charge at the SEC’s Internet website
(http://www.sec.gov) or by contacting the investor relations
department of Morgan Stanley or E*TRADE at the following:
Morgan
Stanley
E*TRADE
1585 Broadway
671 North Glebe Road, Ballston Tower
New York, NY 10036
Arlington, VA 22203
Media Relations: 212-761-2448
mediainquiries@morganstanley.com Investor
Relations: 1-212-762-8131
Media Relations: 646-521-4418
mediainq@etrade.com
Investor Relations: 1-646-521-4406
investorrelations@morganstanley.com
IR@etrade.com
Participants in the Solicitation
Morgan Stanley, E*TRADE, their respective directors and certain
of their respective executive officers may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information regarding the directors and
executive officers of Morgan Stanley and E*TRADE, and their direct
or indirect interests in the transaction, by security holdings or
otherwise will be set forth in the proxy statement/prospectus and
other relevant matters when they are filed with the SEC.
Information regarding the directors and executive officers of
Morgan Stanley is contained in Morgan Stanley’s Form 10-K for the
year ended December 31, 2018 and its proxy statement filed with the
SEC on April 5, 2019. Information regarding the directors and
executive officers of E*TRADE is contained in E*TRADE’s Form 10-K
for the year ended December 31, 2019 and its proxy statement filed
with the SEC on March 26, 2019. Additional information regarding
the participants in the proxy solicitations and a description of
their direct and indirect interests, by security holdings or
otherwise, will be contained in the proxy statement/prospectus and
other relevant materials filed with the SEC when they become
available.
No Offer or Solicitation
This communication is for informational purposes and is not
intended to, and shall not, constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities or a solicitation of any vote of approval, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
Forward-Looking Statements
This communication contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In this context,
forward-looking statements often address expected future business
and financial performance and financial condition, and often
contain words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “see,” “will,” “would,” “target,” similar
expressions, and variations or negatives of these words.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about the
consummation of the proposed transaction and the anticipated
benefits thereof. All such forward-looking statements are subject
to risks, uncertainties and assumptions that could cause actual
results to differ materially from those expressed in such
forward-looking statements. Important risk factors that may cause
such a difference include, but are not limited to, (i) the
completion of the proposed transaction on anticipated terms and
timing, including obtaining required stockholder and regulatory
approvals, anticipated tax treatment, unforeseen liabilities,
future capital expenditures, revenues, expenses, earnings,
synergies, economic performance, indebtedness, financial condition,
losses, future prospects, business and management strategies for
the management, expansion and growth of the combined company’s
operations and other conditions to the completion of the
acquisition, including the possibility that any of the anticipated
benefits of the proposed transaction will not be realized or will
not be realized within the expected time period, (ii) the ability
of Morgan Stanley and E*TRADE to integrate the business
successfully and to achieve anticipated synergies, risks and costs,
(iii) potential litigation relating to the proposed transaction
that could be instituted against Morgan Stanley, E*TRADE or their
respective directors, (iv) the risk that disruptions from the
proposed transaction will harm Morgan Stanley’s and E*TRADE’s
business, including current plans and operations, (v) the ability
of Morgan Stanley or E*TRADE to retain and hire key personnel, (vi)
potential adverse reactions or changes to business relationships
resulting from the announcement or completion of the acquisition,
(vii) continued availability of capital and financing and rating
agency actions, (viii) legislative, regulatory and economic
developments, (ix) potential business uncertainty, including
changes to existing business relationships, during the pendency of
the acquisition that could affect Morgan Stanley’s and/or E*TRADE’s
financial performance, (x) certain restrictions during the pendency
of the acquisition that may impact Morgan Stanley’s or E*TRADE’s
ability to pursue certain business opportunities or strategic
transactions, (xi) unpredictability and severity of catastrophic
events, including, but not limited to, acts of terrorism or
outbreak of war or hostilities, as well as management’s response to
any of the aforementioned factors, (xii) dilution caused by Morgan
Stanley’s issuance of additional shares of its common stock in
connection with the proposed transaction, (xiii) the possibility
that the transaction may be more expensive to complete than
anticipated, including as a result of unexpected factors or events,
(xiv) those risks described in Item 1A of Morgan Stanley’s most
recently filed Annual Report on Form 10-K and subsequent reports on
Forms 10‑Q and 8-K, (xv) those risks described in Item 1A of
E*TRADE’s most recently filed Annual Report on Form 10-K and
subsequent reports on Forms 10-Q and 8-K and (xvi) those risks that
will be described in the proxy statement/prospectus on Form S-4
available from the sources indicated above. These risks, as well as
other risks associated with the proposed acquisition, will be more
fully discussed in the proxy statement/prospectus that will be
included in the registration statement on Form S-4 that will be
filed with the SEC in connection with the proposed acquisition.
While the list of factors presented here is, and the list of
factors to be presented in the registration statement on Form S-4
will be, considered representative, no such list should be
considered to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward-looking statements.
Consequences of material differences in results as compared with
those anticipated in the forward-looking statements could include,
among other things, business disruption, operational problems,
financial loss, legal liability to third parties and similar risks,
any of which could have a material adverse effect on Morgan
Stanley’s or E*TRADE’s consolidated financial condition, results of
operations, credit rating or liquidity. Neither Morgan Stanley nor
E*TRADE assumes any obligation to publicly provide revisions or
updates to any forward-looking statements, whether as a result of
new information, future developments or otherwise, should
circumstances change, except as otherwise required by securities
and other applicable laws.
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Morgan Stanley 1585 Broadway New
York, NY 10036 Media Relations: 212-761-2448
mediainquiries@morganstanley.com Investor Relations: 1-212-762-8131
investorrelations@morganstanley.com
E*TRADE 671 North Glebe Road,
Ballston Tower Arlington, VA 22203 Media Relations: 646-521-4418
mediainq@etrade.com Investor Relations: 1-646-521-4406
IR@etrade.com
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