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Alternative Market Briefing

Morgan Stanley buys E-Trade for $13bn in an all-stock deal

Friday, February 21, 2020

Laxman Pai, Opalesque Asia:

American multinational investment bank and financial services company Morgan Stanley is buying online broker E*Trade Financial Corp. in a $13 billion deal that will reshape the storied investment bank.

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.

A press release said that 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.

James added: "Besides, 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," he said.

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.

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