Morgan Stanley Acquires ETrade in $13 Billion Deal

The combined financial platforms will have $3.1 trillion in client assets

Blue Morgan Stanley signage
Morgan Stanley's acquisition of ETrade is expected to close in the fourth quarter of 2020. Getty Images

Multinational investment giant Morgan Stanley announced today that it is acquiring ETrade Financial Corporation in an all-stock purchase valued at $13 billion.

According to a statement, the combination between the legacy financial services company and e-brokerage pioneer will “support the full spectrum of wealth,” increasing the balance and breadth of Morgan Stanley’s Wealth Management franchise by boosting the firm’s existing 3 million retail client relationships to an estimated 8.2 million.

In addition, ETrade’s online banking and brokerage capabilities will accelerate Morgan Stanley’s digital efforts and enhance the overall consumer experience.

ETrade frequently positioned itself as the brokerage firm for the average investor, while Morgan Stanley has typically catered to more serious investors.

“ETrade’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.

Under the terms of the transaction, ETrade stockholders will receive 1.0432 Morgan Stanley shares for each share they hold. The merger will also significantly increase the number of people enrolled in Morgan Stanley’s Shareworks public stock plan, approximating the grand total at 4.6 million stock plan participants.

Shareholders from both companies are expected to benefit from the potential cost savings estimated at $400 million.

News of this deal comes shortly after e-brokerage company Charles Schwab announced its $26 billion acquisition of TD Ameritrade in November.

According to the statement, Mike Pizzi, CEO of ETrade, will be joining Morgan Stanley and will operate the business within the Morgan Stanley franchise and support the ongoing integration of the two iconic finance brands. One of ETrade’s independent directors will also be invited to join Morgan Stanley’s board.

Pizzi will report to Gorman.

Morgan Stanley said in the statement that it anticipates the acquisition will begin leading to revenue growth once fully phased in (and the acquisition is approved by regulators and ETrade shareholders), by the fourth quarter of 2020.

@monicroqueta Mónica is a breaking news reporter at Adweek.