Growing optimism about a trade deal with China lifted major benchmarks to new highs on Monday. The Dow Jones Industrial Average ( ^DJI 0.04% ) and the S&P 500 ( ^GSPC 0.21% ) both closed at records, propelled by growth stocks, particularly semiconductors and biotechs. Gains were broad-based, with utilities the only falling sector.
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Mergers and acquisitions were in the news, with two previously rumored combinations being confirmed. Charles Schwab ( SCHW 0.15% ) has reached an agreement to buy TD Ameritrade ( AMTD ), and Tiffany ( TIF ) has accepted an offer from LVMH Moet Hennessy ( LVMUY -0.02% ).
Schwab confirms agreement to buy TD Ameritrade
When news leaked last week of an impending merger of brokerage rivals Charles Schwab and TD Ameritrade, shares of both companies jumped despite a lack of any detail on the deal. This morning, Schwab confirmed the agreement and released the terms of the all-stock offer. Investors continued to cheer the move, bidding TD Ameritrade and Schwab up 7.6% and 2.3%, respectively.
Schwab is offering 1.0837 of its shares for each share of TD Ameritrade, valuing the deal at $26 billion. The price amounts to a 17% premium for TD Ameritrade, based on a 30-day average of the two stocks as of Nov. 20, the day before news of the deal leaked, but is still 9% less than TD's 52-week high. TD Ameritrade shares had been under pressure from concern over falling commissions, despite some competitive advantages for its platform.
The combination will double Schwab's client accounts to 24 million, and the company expects cost savings to add 10% to 15% to GAAP earnings per share in three years. The resulting company will have over $5 trillion in client assets, and Schwab expects it will be able to offer a broader range of services and have a better competitive position from the larger scale.
Tiffany agrees to tie the knot
Shares of Tiffany climbed 6.2% to $133.25 after the jewelry specialist announced it had agreed to a sweetened buyout offer from LVMH Moet Hennessy. The French luxury giant intends to pay $135 per share for Tiffany in a deal worth $16.2 billion. LVMH stock also rose on the news, closing up 2.3%.
When Tiffany acknowledged receiving an offer from LVMH for $120 per share last month but said it was reviewing the proposal, its stock soared to almost $130 after investors suspected it could get a better price. Some analysts were thinking the company could be worth as much as $180 per share. Given Tiffany's recent challenges, the price is probably fair, and Tiffany Chairman Roger Farah said in the press release that the deal delivers "a compelling price with value certainty to our shareholders," indicating that investors shouldn't expect any competing bids.