Charles Schwab's $26B offer for TD Ameritrade may jump start M&A
Merger mania may heat up thanks to Charles Schwab and TD Ameritrade.
Charles Schwab’s $26 billion offer for TD Ameritrade, as reported by FOX Business, could spark a flurry of corporate acquisitions.
The value of dealmaking in the Americas this year is around $1.76 trillion, just slightly ahead of 2018's $1.65 trillion, according to data from Dealogic shared with FOX Business. Concerns have been mounting that deals could slow amid corporate caution fanned by the briefly inverted yield curve as well as weakness in the U.S. manufacturing sector, which makes up about 10 percent of the economy.
“Just four months ago we were talking about being on the edge of a recession,” David Dietze, president and chief investment strategist at Point View Wealth Management, told FOX Business’ Charles Payne on “Making Money.”
The economic soft patch “put pause in a lot of companies’ plans to get bigger,” but now that the economy is showing resilience, “we could play a little bit of catch-up” over the next six months, he said.
Speculation and news of corporate tie-ups, of considerable size, has started to percolate over the past few weeks.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BBT | n.a. | n.a. | n.a. | n.a. |
| STI | NUBIA BRAND INTERNATIONAL CORP. | 2.44 | +0.46 | +23.23% |
On Wednesday, the merger between BB&T and SunTrust Banks received Federal Reserve approval. The transaction, expected to be completed before year-end, will create the sixth-largest U.S. bank by assets.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GS | THE GOLDMAN SACHS GROUP INC. | 420.04 | -2.89 | -0.68% |
| BAC | BANK OF AMERICA CORP. | 37.91 | -0.41 | -1.07% |
| MS | MORGAN STANLEY | 92.58 | -1.28 | -1.36% |
“I’m looking for where sectors have been dormant forever,” Paul Schatz, Heritage Capital president, told Payne. One area in which Schatz predicts deals is regional banking, which he says is “screaming for Goldman, Morgan Stanley and Bank of America to get involved.”
While the big banks haven’t gotten involved with the regionals just yet, FOX Business’ Charlie Gasparino reports Goldman Sachs may be eyeing the sector. Possible targets could include the $92.9 billion U.S Bank and the $9.4 billion online broker E-Trade. He says bankers are expecting more mergers in the financial sector as firms look to get bigger and reduce costs.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| ETFC | n.a. | n.a. | n.a. | n.a. |
| USB | U.S. BANCORP | 40.98 | -0.65 | -1.55% |
Earlier this month, the private-equity firm KKR reportedly approached Walgreens Boots Alliance about a go-private deal that would be the biggest leveraged buyout in history. At the time of KKR’s approach, Walgreens had a market capitalization of almost $56 billion, although analysts say the deal could be even larger.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| WBA | WALGREENS BOOTS ALLIANCE INC. | 17.60 | -0.21 | -1.18% |
Another potential deal is a tie-up between Xerox and HP. Earlier this week, HP rejected a $33 billion offer from Xerox as too low. Xerox has said it could go to HP shareholders to try and win approval.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| HPQ | HP INC. | 28.13 | +0.02 | +0.07% |
| XRX | XEROX HOLDINGS CORP. | 14.18 | -0.20 | -1.39% |
And on Thursday, Reuters reported Unilever, Henkel and Colgate-Palmolive were looking to make a play for Coty’s hair and beauty brands, valued at up to $7 billion.
Schatz expects a “merger mania” before the bull market ends, though he concedes he’s not sure it will get to the “outlandishly crazy” levels of the 1980s.