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Morgan Stanley Gets Fed’s Greenlight to Acquire E*Trade

By Alex Padalka October 1, 2020

The Federal Reserve Board says it has approved Morgan Stanley’s acquisition of online brokerage giant E*Trade.

The companies first announced the $13 billion deal in February, and the Department of Justice approved the acquisition in March. In July, E*Trade’s shareholders voted to approve the merger. E*Trade CEO Michael Pizzi is set to receive a $32 million golden parachute package at the close of the deal.

The acquisition will bolster Morgan Stanley’s presence across all wealth management channels as well as give the company access to the mass affluent market it’s been recently luring. 

But during a second-quarter earnings call with analysts in July, Morgan Stanley chief financial officer Jonathan Pruzan said that integrating E*Trade will likely slash the wealth management unit’s profit margins by 50 to 100 basis points in the third quarter, as reported

The Fed, which approved the acquisition yesterday, says that it received 72 comments on the proposed deal from individuals and organizations, and that the “vast majority of commenters supported the proposal.” 

Three comments, however, opposed the acquisition, expressing concern about the deal’s competitive effects, criticizing “Morgan Stanley’s compliance and corporate responsibility record” and asserting that the combined entity would be “too big to fail” and thus represent a risk to U.S. financial stability, according to the Fed’s order approving the deal, published Wednesday.

Morgan Stanley has approximately $975.4 billion in consolidated assets, making it the sixth largest insured depository organization in the nation, the Fed says. After the acquisition of E*Trade, which has around $70.4 billion in consolidated assets, Morgan Stanley would still remain the sixth largest insured depository organization in the country, according to the order.

On the same day the Fed approved Morgan Stanley's acquisition of E*Trade, it also approved Charles Schwab's acqusition of TD Ameritrade.

Morgan Stanley and E*Trade expect to complete the transaction on October 2.

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