TD Ameritrade buying rival brokerage Scottrade for $4

billion; STL will lose hundreds of jobs

TD Ameritrade buying rival brokerage Scottrade for $4 billion; STL will lose hundreds of jobs |
Business | stltoday.com
TD Ameritrade and Toronto-Dominion Bank have agreed to buy Scottrade in a $4 billion deal that
combines two of the nation's leading discount brokerages, but will cost the St. Louis region
hundreds of jobs.
The sale, announced early Monday, is subject to regulatory approvals, and is slated to close by Sept.
30, 2017, the companies said.
Town and Country-based Scottrade, based in the St. Louis area since the mid-1980s, will convert to
TD Ameritrade systems in 2018.
The deal, which comes at a time when the industry is wrestling with sluggish revenue growth, will
produce a combined business with around 10 million client accounts and nearly $1 trillion in total
client assets. Together, the two firms execute around 600,000 trades per day.
COMPANY HEADQUARTERS THAT HAVE LEFT ST. LOUIS
"It gives us a lot of power to combine the two," Scottrade's founder and CEO Rodger Riney told the
Post-Dispatch Monday. "It is a business that has become ever more competitive as the years have
gone by ... and scale is more important than ever. The more clients you have, the less expensively
you can offer services to clients."
Riney's net worth is expected to rise to $4 billion with the deal, according to an estimate by
Bloomberg News, making him one of the world's richest people. He will join TD Ameritrade's board
of directors when the sale finalizes and is poised to become TD Ameritrade's second largest
individual shareholder after TD Ameritrade founder J. Joseph Ricketts, whose family owns the
Chicago Cubs baseball team.
The fate of Scottrade employees is less clear. The company has about 1,800 employees in the St.
Louis region, primarily at its headquarters at 700 Maryville Centre Drive in Town and Country and
offices at 13075 Manchester Road in Des Peres and 12800 Corporate Hill Drive in unincorporated
St. Louis County.
Although TD Ameritrade pledges to keep a significant presence in St. Louis, including a sizable call
center, there will be job losses.
"After the integration, we'll have between 500 and 1,000 jobs in the St. Louis area," TD Ameritrade
CEO Tim Hockey told the Post-Dispatch in a phone interview.
Scottrade's current nationwide headcount of 3,700 will total about half that figure following the sale,
company officials said. And the number of branch offices -- TD Ameritrade has about 100 and
Scottrade has 500 -- will be pared by about 150. Locations have not been identified.
Outside of its headquarters in Omaha, Neb., TD Ameritrade also has large offices in Dallas, New

Jersey and Chicago.

Sheila Sweeney, CEO of the St. Louis Economic Partnership, said St. Louis' financial services sector
remains strong, which could help minimize the local job impact. Financial services companies based
in the St. Louis area include Edward Jones, Stifel Financial Corp., and Wells Fargo Advisors.
"We will make sure in the coming months that TD Ameritrade understands the benefits of operating
in St. Louis, with the strong financial services sector here," Sweeney said. "Our primary concern is
for employees and the jobs. We know we have our work cut out for us to try to retain those jobs.
These are two well respected, well run companies and we'll do whatever we need to do to convince
TD Ameritrade to keep the presence they have here."
The acquisition -- the largest in TD Ameritrade's history -- more than quadruples the size of TD
Ameritrade's branch network. Even as customers gravitate to online services, there's still demand
for in-person conversations with knowledgeable employees, Hockey said.
"Even though everyone is enamored about talking about technology, managing trading and wealth
are very important conversations and (customers) want to talk to someone they know and trust in
their community," Hockey said.
"Scottrade clients will get the benefit of deeper education solutions and more products," Hockey
added. "This gives us a lot more scale which will allow us to invest in more innovations."
The deal will occur in two steps. TD Bank Group is buying Scottrade's banking arm, Scottrade Bank,
for $1.3 billion. The bank will be merged into TD Bank NA, a subsidiary of Toronto-based TorontoDominion Bank, TD's largest investor. Following that transaction, TD Ameritrade will acquire
Scottrade Financial Services for $2.7 billion.
TD Ameritrade was founded in 1975 as First Omaha Securities, the first company to offer discount
stock trades. It has 7 million accounts and $774 billion in clients assets.
Scottrade, which has $170 billion in client assets and more than 3 million accounts, was founded by
Riney as Scottsdale Securities in Scottsdale, Ariz., in 1980. A year later, Riney opened the company's
second branch in the St. Louis area.
Riney relocated the headquarters to St. Louis County in 1985. When it launched its website in 1996,
the company was among the first to offer online trading. The company chose Scottrade.com as its
home page because Scottsdale.com was already taken.
The company, renamed Scottrade in 2000, had $1.11 billion in annual revenue in 2015. Its four
business lines are brokerage, investment adviser services, banking and investment management. On
Monday, Hockey called Riney and Scottrade pioneers in self-directed investing.
Riney, 70, announced last fall he was suffering from multiple myeloma, a form of blood cancer. His
health issues are well under control, Riney said, but played a factor in the company's decision to sell
after decades of operating as an independent, privately held firm.
Riney said he decided not to take the company public and turned down multiple offers by potential
suitors over the years because the company was happy being independent.
"It seemed like the right time," Riney said of Monday's sale announcement, noting that the two

companies were founded within a few years of each other and share similar operating philosophies
based on client service. "After a thorough process, we realized that TD Ameritrade would be the best
partner for our associates and clients," he added.
"We break our backs to give great customer service and TD Ameritrade does the same," Riney
continued. "Between the two of us, we have about 80 years of brokerage experience."
Following the finalization of the merger, the Scottrade name will be phased out, including at the
Scottrade Center arena downtown, home of the National Hockey League's St. Louis Blues. The
arena's name will be changed to TD Ameritrade Center, Hockey said. The contract for the naming
rights runs through 2021. "We'll be talking to the owners of Scottrade Center," he said.
Scottrade's pending sale to TD Ameritrade comes amid consolidation in the industry, which could
make receiving antitrust approval more difficult. Already this year, discount brokerage E*Trade
Financial Corp. announced plans to acquire OptionsHouse for $725 million and Ally Financial
finalized its acquisition of digital wealth management company TradeKing Group for $275 million.
"Regulators will look at this very carefully at it because of its size," said Tim Greaney, law professor
at St. Louis University School of Law. Regulators will look at the two companies' overlapping
products, where they compete and their size, to determine if competition is lessened, he said.
"The Obama administration has been very tough and vigilant on mergers, and I certainly don't think
the Clinton administration is going to be any less vigilant," Greaney said.
But Mark Williams, a finance professor at Boston University's Questrom School of Business, said
plenty of competition remains in the industry so antitrust approval likely won't stand in the way of
the deal finalizing.
"The market is so competitive as-is, and execution and costs should be enhanced for customers with
the sale," Williams said, adding TD Ameritrade has built its business making order execution cheap
relative to the traditional brokerage companies such as Morgan Stanley and Merrill Lynch.
"Consumers are looking for companies who can execute a trade like it's a commodity, and
Ameritrade will be a dominant player in the online space."
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