Shares of E*Trade Financial (NASDAQ: ETFC) surged by nearly 22% on Thursday after news broke that it had struck a deal to be acquired by Morgan Stanley (NYSE: MS).
Morgan Stanley agreed to purchase E*Trade for $13 billion. The all-stock deal will see E*Trade shareholders receive 1.0432 shares of Morgan Stanley for each share of E*Trade that they own. Based on closing prices on Feb. 19, that equates to an approximately 30% premium to the level at which E*Trade stock had traded prior to news of the deal.
The merger is expected to help Morgan Stanley scale its wealth management business. E*Trade has more than 5.2 million client accounts with over $360 billion in assets, including $56 billion in low-interest deposits. The deal is also expected to bolster Morgan Stanley's direct-to-consumer trading technology and, by extension, help it appeal to more individual investors who like to purchase stocks and bonds without advisor support.