Charles Schwab plans to move HQ to Westlake as it buys TD Ameritrade in brokerage blockbuster

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NEW YORK (AP) — Charles Schwab is buying rival TD Ameritrade in a $26 billion stock swap, a blockbuster agreement accelerated by massive disruption in the online brokerage industry.

As part of the combination, the corporate headquarters of the combined company will eventually relocate to Schwab’s new campus in Westlake. Both companies have a sizable presence in the Dallas-Fort Worth area, the news release noted. This will allow the combined firm to take advantage of the central location of the new Schwab campus to serve as the hub of a network of Schwab branches and operations centers that span the entire U.S., and beyond, according to the news release. Any additional real estate decisions will be made over time as part of the integration process.

Schwab was founded in San Francisco and has maintained a longstanding commitment to the Bay Area, which will continue, the company said. A small percentage of roles may move from San Francisco to Westlake over time, either through relocation or attrition. The vast majority of San Francisco-based roles, however, are not anticipated to be impacted by this decision, the company said.

Competitive pressure has already forced brokerages to make it free for customers to trade U.S. stocks online, and Schwab’s buyout combines two of the biggest players in the industry.

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The tie-up creates a company so big, however, that it may draw sharp scrutiny from antitrust regulators. The combined company would have more than $5 trillion in client assets under management.

“With this transaction, we will capitalize on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys,” Schwab CEO Walt Bettinger said in a prepared statement.

TD Ameritrade stockholders would receive 1.0837 Schwab shares for each TD Ameritrade share they own.

The transaction gives Schwab about 12 million client accounts, $1.3 trillion in client assets and approximately $5 billion in annual revenue. The combined company is expected to control 24 million client accounts.

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By itself, Schwab may control close to half the market for acting as a custodian for money managed by registered investment advisers, for example, while TD Ameritrade may control about 15% to 20%, according to Kyle Voigt, an analyst with Keefe, Bruyette & Woods.

The rewards for passing regulatory muster would be lucrative: A combined company “makes strong strategic sense,” would be able to cut costs and could bump up Schwab’s earnings per share by more than 25% over the long term, Voigt said.

The deal could also herald more mergers across the industry.

Schwab sent shockwaves through the industry less than two months ago when it said it would do away with commissions for online trading of U.S. stocks and exchange-traded funds, fees that have long fueled the industry.

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All major brokerages have followed suit, but fees had been falling for years.

Beyond players like Schwab, TD Ameritrade, Fidelity and E-Trade Financial, apps like robinhood.com out of Palo Alto, California, have also entered the fray to help customers get invested in the market.

That has increased the pressure on San Francisco’s Schwab Corp. and TD Ameritrade Holding Corp., of Omaha, Nebraska, the biggest publicly traded brokerages. Schwab had $3.85 trillion in total client assets at the start of the month, while TD Ameritrade had $1.3 trillion at the end of September.

The deal is expected to close in the second half of next year. It’s anticipated to take 18 to 36 months to integrate the two businesses once the transaction is complete. The corporate headquarters of the combined company will eventually relocate to Schwab’s new campus in Westlake, Texas.

The Toronto-Dominion Bank, which currently holds approximately 43% of TD Ameritrade’s stock, will have an ownership position of approximately 13% in the combined company, with other TD Ameritrade stockholders and existing Schwab stockholders holding approximately 18% and 69%, respectively.

TD Ameritrade suspended its search for a CEO, naming Chief Financial Officer Stephen Boyle as interim CEO. The current CEO, Tim Hockey, announced in July that he would be stepping down early next year.

Trading in shares of both companies was muted before the opening bell after wild swings last week when CNBC first reported that the companies were pursuing a deal.

Schwab has been growing its presence in the North Texas area over the past few years, opening a state-of-the-art employment center facility in Westlake this year for employees already working in the D-FW area, while allowing for significant growth and expansion.

The new campus, which is set on Turner Lake, is 20 minutes from the Dallas Fort Worth International Airport, in a highly visible location off State Highways 170 and 114. Phase I will be 500,000 square feet of office space on a 70-acre site. When both phases are completed, Charles Schwab will have 1.1 million square feet, four office buildings, two parking garages and an auditorium. It is part of a 130-acre mixed-use development at Circle T managed by Hillwood and The Howard Hughes Corp.

The financial services giant has taken over the title sponsorship of Fort Worth’s premier professional golf tournament at Colonial Country Club, now named The Charles Schwab Challenge. Though the company has long been involved with the PGA Tour, this is the first time it will have its name as a title sponsor. Schwab has a four-year contract as sponsor, with 2019 being the first year.

Credit Suisse Securities (USA) LLC served as financial advisor and Davis Polk & Wardwell LLP acted as legal advisor to The Charles Schwab Corporation. PJT Partners LP and Sandler O’Neill + Partners LP served as financial advisors and Wachtell, Lipton, Rosen & Katz acted as legal advisor to the Strategic Development Committee of the Board of Directors of TD Ameritrade.

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AP Business Writer Michelle Chapman contributed to this story. FWBP Staff contributed.

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