NEW YORK _ Morgan Stanley agreed to buy E-Trade Financial Corp. for $13 billion, adding the retail brokerage to its Wall Street powerhouse and continuing the industry's consolidation.
The all-stock takeover adds E-Trade's $360 billion of client assets to Morgan Stanley's $2.7 trillion, the companies said Thursday in a statement. Morgan Stanley also gets E-Trade's direct-to-consumer and digital capabilities to complement its full-service, advisory-focused brokerage.
"E-Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy," Chief Executive Officer James Gorman said in the statement. "This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue."
E-Trade last month posted worse-than-expected earnings in a quarter when the online brokerage was forced to slash trading fees and two of its biggest competitors agreed to merge.
The race to commission-free trading has shaken up the discount brokerage industry, with E-Trade rival Charles Schwab Corp. announcing it was eliminating trading commissions for U.S.-listed stocks, exchange-traded funds and options, and then agreeing to buy competitor TD Ameritrade Holding Corp.
E-Trade stockholders will receive 1.0432 Morgan Stanley shares for each of their shares, valued at $58.74 based on Wednesday's closing price.
Morgan Stanley slumped in early trading, dropping 4.5% to $53.75 at 7:39 a.m. in New York. E-Trade surged 6.8% to $48.
