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Portfolio > Portfolio Construction

Schwab-TD Ameritrade Deal Gets DOJ Approval

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Charles Schwab and TD Ameritrade’s planned $26 billion merger has cleared a major regulatory hurdle with the Department of Justice approving the transaction, Schwab announced early Thursday.

“We’re gratified by the DOJ’s [June 3] decision and appreciate its diligent and thorough review,” according to Schwab President and CEO Walt Bettinger.

“We are pleased to be clearing an important milestone in our planned acquisition of TD Ameritrade and look forward to today’s scheduled votes by the stockholders of our two companies, which represent another important step toward completion of the transaction,” Bettinger explained in a statement.

The DOJ’s Antitrust Division launched a second request in the discovery procedure earlier this year in order to review the potential anti-competitive impacts of the deal, which was announced in November.

“There have been questions over the concentration of business tied to registered investment advisors … but the DOJ in its investigation, according to sources, apparently did not see any violation,” CNBC reporter David Faber said in an interview on that channel early Thursday before Schwab released the news. 

“This deal is well on its way to closing,” Faber noted. 

Last week, one analyst gave the deal a strong chance of completion. 

“We believe the merger is more likely than not to occur and currently incorporate a 75% probability of its going through in our valuation model,” said Michael Wong, Morningstar’s director of equity research for financial services, in a recent report. 

Both firms said recently that they expected the merger to be completed in the second half of 2020. Integration between the two companies, though, could take  between 18 and 36 months, according to TD Ameritrade Institutional President Tom Nally.

Today’s Shareholder Vote

Another hurdle could be surmounted later today when TD Ameritrade shareholders vote to support or reject the deal.

If two-thirds vote in favor, it would supersede a lawsuit against the transaction that argues Schwab became an “interested stockholder,” as defined by a Delaware law, in its merger activities before its board approved and went public with the news of the deal. 

Schwab disagrees with this argument but says if a court in Delaware rules against it, TD Ameritrade cannot merge with it for three years since the time it “became an interested shareholder.”

This matter, though, can be superseded if “the business combination is approved by the TD Ameritrade board of directors and authorized by the TD Ameritrade stockholders by the affirmative vote of at least 66 2/3% of the outstanding TD Ameritrade common stock,” Schwab said in a recent filing. 

Separately, Schwab said it updated and amended a prospectus in order to put to rest eight other lawsuits concerning an “incomplete and misleading registration statement.” 

“TD Ameritrade and Schwab believe that no further disclosure is required to supplement the definitive joint proxy statement/prospectus under applicable law,” the two firms explained. 

“However, to avoid the risk that the lawsuits may delay or otherwise affect the consummation of the merger and to minimize the expense and distraction of defending such actions, TD Ameritrade wishes to voluntarily make the supplemental disclosures related to the merger,” the two firms state in the document.

— Check out Why Goldman’s Folio Deal Is Good News for Schwab on ThinkAdvisor.


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