Ally Financial Inc. (ALLY) today announced that it has signed an agreement to acquire TradeKing Group, Inc., a digital wealth management company.
The transaction is expected to close in the third quarter and includes an online broker/dealer, a digital portfolio management platform, and educational content and social collaboration channels. The transaction is subject to regulatory approval from the Financial Industry Regulatory Authority (FINRA) and compliance with the Hart-Scott-Rodino Antitrust Improvements Act, as well as satisfaction of other customary closing conditions.
"The addition of wealth management is the next key step in Ally's digital product evolution and will create a powerful combination of segment-leading direct banking and innovative investment services in a single integrated customer experience," said Ally Chief Executive Officer Jeffrey Brown. "This transaction presents a compelling opportunity for customers and a logical growth opportunity for Ally."
Brown continued, "The trend toward digitally-based financial services continues to gain momentum with consumers in general, and we see even greater opportunities ahead as the millennial generation begins to require a broader selection of financial products, including wealth management. We see strong alignment between Ally's loyal and digitally-savvy customer base and TradeKing's innovative, client-centric business. This transaction positions Ally to further capitalize on emerging market trends, drive additional efficient deposit growth and diversify our revenue stream by adding fee-based income – all of which we believe will enhance shareholder value over time."
Earlier this year, Ally also announced it would add credit card and mortgage products to its Ally Bank franchise.
Ally will purchase TradeKing for approximately $275 million, subject to certain purchase price adjustments, representing approximately $250 million in premium to the acquired net assets. The transaction is expected to have a marginal impact on Ally's 2016 and 2017 results due to transaction costs, and be accretive in 2018 with meaningful growth potential in the future as consumer preferences drive a greater shift toward digital wealth management services.
The TradeKing acquisition will not impact Ally's plan to pursue common stock dividends and a common stock repurchase program as part of its 2016 capital plan, which is subject to regulatory approval. Ally plans to move forward with the redemption of approximately $700 million of its Series A Preferred Stock outstanding; however, Ally will indefinitely defer the redemption of approximately $500 million of its trust preferred securities in support of this transaction.
TradeKing's offering consists of an online broker/dealer for self-directed investors, professionally-managed portfolios through an automated and fully-transparent online process, and an extensive set of educational content and social collaboration channels. TradeKing has approximately $4.5 billion in client assets, including approximately $1.1 billion of cash and cash investments, 260,000 funded accounts and 20,000 daily average revenue trades (DARTs). TradeKing has received 4 stars in Barron's Online Broker Survey for 10 consecutive years and was recently, once again, recognized on Barron's Online Broker Survey as one of the "Best for Options Traders".
"Ally and TradeKing have a shared philosophy in bringing customers and clients an exceptional digitally-oriented experience, with award-winning customer service and competitive products," said Diane Morais, CEO and president of the Ally Bank subsidiary. "We look forward to welcoming the TradeKing team to the Ally family as we aim to deliver additional products and services to our combined set of customers under the Ally brand, which is a recognized leader in digital financial services."
Commenting on the future customer opportunities, Morais said, "Ally has a loyal and growing base of customers who have a need for wealth management services and continually ask us to expand our offering. We also believe there is an opportunity to offer TradeKing clients competitive deposit products that can enhance their overall savings strategies, and we are optimistic about the future potential of the franchise we are building."
TradeKing is headquartered in Fort Lauderdale, Fla., and also has a significant presence in Charlotte, N.C. TradeKing's seasoned management team and workforce of approximately 180 team members will join Ally following the closing of the transaction and advance the growth strategy.
Don Montanaro, CEO of TradeKing said, "We are thrilled to have found a partner who shares our core philosophy of delivering a great client experience digitally and through multiple channels. This is great news for our clients and our teammates, as we will continue to bring innovation and outstanding value to the marketplace, only now with the power and breadth of services of the Ally brand in our corner. We look forward to being part of this modern digital financial services company."
Ally was advised on this transaction by Goldman, Sachs & Co., Jarrett Lilien and Sullivan & Cromwell LLP. TradeKing was advised by Bank of America Merrill Lynch and Cooley LLP.