Schwab-TD Ameritrade Merger Draws Another Lawsuit
Another plaintiffs’ law firm has filed a lawsuit to block Charles Schwab Corp.’s planned acquisition of TD Ameritrade Holding Corp.
The suit, which names TD Ameritrade and its directors as defendants, seeks to stop the deal from proceeding on the grounds that shareholders can’t adequately value the offer because of “materially false and misleading” financial projections in the registration statements and omissions of potential conflicts of interest of investment banks that rendered fairness opinions.
The lawsuit mirrors two others in the past three weeks, including one seeking class-action certification, making similar claims.
Such suits have become common in proposed mergers, with at least four filed last year attempting to halt Advisor Group’s now-completed takeover of Ladenburg Thalmann Financial Services. The lawsuits are often withdrawn after agreements are reached to pay attorneys’ fees and amend disclosure documents, giving rise to their designation in legal circles as “moot suits,” according to a directors-and-officers insurance blog from a lawyer at Ohio-based RT Specialty.
When the Schwab-TD deal was announced on November 25, Schwab said it would exchange 1.0837 of its shares for every TD Ameritrade share, valuing the transaction at $26 billion. Schwab shares, which were trading at $49.31 at the time, closed at $33.61 on Tuesday.
The Justice Department has asked the firms for a second round of data as it evaluates antitrust aspects of the discount brokerage megadeal.
Schwab does not comment on pending litigation as a matter of policy, but expects the deal to close in the second half of 2020, as initially announced, a spokesman said. A TD Ameritrade spokeswoman also declined to comment.
Another suit seeking to block the deal was dismissed in January. It was filed by Franklin Tsung, a registered investment advisor whose father founded a firm that makes customer relationship management software that TD Ameritrade offers to RIAs.