S-4 1 d893414ds4.htm S-4 S-4
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As filed with the Securities and Exchange Commission on March 10, 2020

Registration No. []

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

THE CHARLES SCHWAB CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   6211   94-3025021

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

211 Main Street

San Francisco, California 94105

(415) 667-7000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Peter Crawford

Executive Vice President and Chief Financial Officer

The Charles Schwab Corporation

211 Main Street

San Francisco, California 94105

(415) 667-7000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

 

Copies to:

Randall D. Guynn, Esq.

William L. Taylor, Esq.

Lee Hochbaum, Esq.

Davis Polk & Wardwell LLP

450 Lexington Ave.

New York, New York 10017

(212) 450-4000

 

Edward D. Herlihy, Esq.

Matthew M. Guest, Esq.

Jacob A. Kling, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

(212) 403-2000

 

Stephen J. Boyle

Interim President and
Chief Executive Officer
TD Ameritrade Holding Corporation
200 South 108th Avenue
Omaha, Nebraska 68154
(800) 669-3900

 

 

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective and upon completion of the merger of Americano Acquisition Corp., a wholly owned subsidiary of The Charles Schwab Corporation (“Schwab”), with and into TD Ameritrade Holding Corporation (“TD Ameritrade”). 

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐ (Do not check if a smaller reporting company)    Smaller reporting company  

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Securities Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Securities Exchange Act Rule 14d-l(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Security Being Registered
  Amount
to be
Registered(1)
  Proposed Maximum
Offering Price
Per Share
  Proposed Maximum
Aggregate
Offering Price(2)
  Amount of
Registration
Fee(3)

Common stock, $0.01 par value per share

  340,912,226   N/A   $9,898,314,292   $1,284,801

 

(1)

Represents the maximum number of shares of the registrant’s common stock estimated to be issuable upon the completion of the merger described herein, based on (A) the sum of (i) the number of shares of common stock, par value $0.01 per share, of TD Ameritrade Holding Corporation (“TD Ameritrade”) (“TD Ameritrade common stock”) outstanding as of March 5, 2020, excluding shares of TD Ameritrade stock held by The Toronto-Dominion Bank and its affiliates (other than shares held on behalf of third parties), plus (ii) the number of shares of TD Ameritrade common stock issuable in respect of restricted stock unit awards of TD Ameritrade outstanding as of March 5, 2020, plus (iii) the maximum number of shares of TD Ameritrade common stock that may be issued by TD Ameritrade after March 5, 2020 (including (x) all shares of TD Ameritrade common stock issuable upon exercise of stock options of TD Ameritrade outstanding as of March 5, 2020 and (y) all shares of TD Ameritrade common stock issuable in respect of restricted stock unit awards that TD Ameritrade may issue pursuant to the Agreement and Plan of Merger, dated as of November 24, 2019, by and among the registrant, Americano Acquisition Corp. and TD Ameritrade at any time after the date thereof and prior to the effective time of the merger), multiplied by (B) the exchange ratio of 1.0837 shares of common stock, par value $0.01 per share, of the registrant for each share of TD Ameritrade common stock.

(2)

Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act and computed pursuant to Rule 457(f)(1) and 457(c) of the Securities Act. The proposed maximum aggregate offering price of the registrant’s common stock was calculated based upon: the product of (A) $31.47, the average of the high and low prices per share of TD Ameritrade common stock on the NASDAQ Global Select Market on March 9, 2020 and (B) 314,581,735, the maximum possible number of shares of TD Ameritrade common stock which may be cancelled and exchanged pursuant to the merger described herein, calculated as set forth under clause (A) of footnote (1) above.

(3)

Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $129.80 per $1,000,000 of the proposed maximum aggregate offering price.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This joint proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

PRELIMINARY—SUBJECT TO COMPLETION—DATED MARCH 10, 2020

[●], 2020

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

Dear Schwab Stockholders and TD Ameritrade Stockholders:

On behalf of the boards of directors of The Charles Schwab Corporation, which is referred to in the accompanying joint proxy statement/prospectus as Schwab, and TD Ameritrade Holding Corporation, which is referred to in the accompanying joint proxy statement/prospectus as TD Ameritrade, we are pleased to enclose the joint proxy statement/prospectus relating to the merger of TD Ameritrade with a wholly owned subsidiary of Schwab, pursuant to the terms of the Agreement and Plan of Merger, dated as of November 24, 2019, which is referred to in the accompanying joint proxy statement/prospectus as the merger agreement. If the merger is completed, TD Ameritrade stockholders immediately prior to the effective time of the merger will receive, in exchange for each share of TD Ameritrade common stock owned immediately prior to the merger, 1.0837 shares of Schwab common stock, as described in more detail in the accompanying joint proxy statement/prospectus under the heading “The Merger Agreement—Merger Consideration.” Based on the number of shares of TD Ameritrade common stock outstanding as of [], 2020, and the number of shares of Schwab common stock outstanding as of [], 2020, it is expected that, immediately after completion of the merger, former TD Ameritrade stockholders will own approximately [●]% of the outstanding Schwab common shares (including Schwab common stock and Schwab nonvoting common stock). The value of the consideration to be received by TD Ameritrade stockholders will fluctuate with changes in the price of shares of Schwab common stock and TD Ameritrade common stock. We urge you to obtain current market quotations for shares of Schwab common stock and shares of TD Ameritrade common stock. The shares of Schwab common stock are traded on the New York Stock Exchange under the symbol “SCHW” and the shares of TD Ameritrade common stock are traded on the NASDAQ Global Select Market under the symbol “AMTD.”

Each of TD Ameritrade and Schwab will be holding a special meeting for TD Ameritrade stockholders and Schwab stockholders, respectively, to consider and vote on certain matters in connection with the merger.

TD Ameritrade stockholders are cordially invited to attend a special meeting of TD Ameritrade stockholders to be held on [], at [], located at [], at [], local time. At the TD Ameritrade special meeting, TD Ameritrade stockholders will be asked to approve and adopt the merger agreement.

Schwab stockholders are cordially invited to attend a special meeting of Schwab stockholders to be held on [], at [], located at [], at [], local time. At the Schwab special meeting, Schwab stockholders will be asked to approve the issuance of Schwab common shares to TD Ameritrade stockholders in the merger, which is referred to in the accompanying joint proxy statement/prospectus as the share issuance, and an amendment to the fifth amended and restated certificate of incorporation of Schwab to create a new class of nonvoting common stock, which amendment is referred to in the accompanying joint proxy statement/prospectus as the Schwab charter amendment.

We cannot complete the merger unless TD Ameritrade stockholders approve and adopt the merger agreement and Schwab stockholders approve the share issuance and the Schwab charter amendment. Approval and adoption of the merger agreement by TD Ameritrade stockholders requires the affirmative vote of (i) the holders of a majority of the shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting and (ii) the holders (other than TD Bank, the significant TD Ameritrade stockholders (as defined in the accompanying joint proxy statement/prospectus) and their respective affiliates) of


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a majority of the shares of TD Ameritrade common stock (other than shares of TD Ameritrade common stock held by TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) outstanding and entitled to vote at the TD Ameritrade special meeting. Under the rules of the New York Stock Exchange, which is referred to in the accompanying joint proxy statement/prospectus as the NYSE, approval of the share issuance requires at a minimum the affirmative vote of a majority of the votes cast by holders of shares of Schwab common stock, and the vote required by Schwab’s amended and restated bylaws, which are referred to in the accompanying joint proxy statement/prospectus as the Schwab bylaws, meets or exceeds this standard by requiring an affirmative vote of the holders of a majority of shares of Schwab common stock present in person or by proxy at the Schwab special meeting. Approval of the Schwab charter amendment requires the affirmative vote of the holders of a majority of the shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting.

Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the TD Ameritrade special meeting or the Schwab special meeting in person, please vote or otherwise submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the TD Ameritrade special meeting or the Schwab special meeting, as applicable. If your shares are held in the name of a broker, bank, nominee or other holder of record, please follow the instructions on the voting instruction form furnished to you by such record holder.

In addition, at the TD Ameritrade special meeting, TD Ameritrade stockholders will be asked to approve, on a non-binding, advisory basis, certain compensation arrangements that may be paid or become payable to TD Ameritrade’s named executive officers in connection with the merger contemplated by the merger agreement, which is referred to in the accompanying joint proxy statement/prospectus as the TD Ameritrade merger-related compensation proposal. Furthermore, at each of the TD Ameritrade special meeting and the Schwab special meeting, TD Ameritrade stockholders and Schwab stockholders will be asked to approve the adjournment of the TD Ameritrade special meeting or the Schwab special meeting, as applicable, under certain circumstances, which are referred to in the accompanying joint proxy statement/prospectus as the TD Ameritrade adjournment proposal and the Schwab adjournment proposal, respectively.

The TD Ameritrade board of directors, acting upon the unanimous recommendation of a strategic development committee of the TD Ameritrade board of directors composed solely of independent and disinterested directors, which is referred to in the accompanying joint proxy statement/prospectus as the strategic development committee, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, TD Ameritrade and TD Ameritrade stockholders, and unanimously recommends that TD Ameritrade stockholders vote “FOR” the approval and adoption of the merger agreement, “FOR” the TD Ameritrade merger-related compensation proposal and “FOR” the TD Ameritrade adjournment proposal.

The Schwab board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the share issuance and the Schwab charter amendment, are advisable and fair to, and in the best interests of, Schwab and the Schwab stockholders, and unanimously recommends that Schwab stockholders vote “FOR” the approval of the share issuance, “FOR” the approval of the Schwab charter amendment and “FOR” the Schwab adjournment proposal.

The accompanying joint proxy statement/prospectus provides important information regarding the special meetings and a detailed description of the merger agreement, the merger and the matters to be presented at the special meetings. We urge you to read the accompanying joint proxy statement/prospectus (and any documents incorporated by reference into the accompanying joint proxy statement/prospectus) carefully. Please pay particular attention to the section entitled “Risk Factors” beginning on page 66.

We hope to see you at the special meetings and look forward to the successful completion of the merger.


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Sincerely,

 

LOGO   

LOGO

Walter W. Bettinger II    Stephen J. Boyle
President and Chief Executive Officer    Interim President and Chief Executive Officer
The Charles Schwab Corporation    TD Ameritrade Holding Corporation

LOGO

 

Charles R. Schwab

  

LOGO

 

Joseph H. Moglia

Chairman of the Board    Chairman of the Board
The Charles Schwab Corporation    TD Ameritrade Holding Corporation

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying joint proxy statement/prospectus or determined that the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying joint proxy statement/prospectus is dated [], 2020 and is first being mailed to Schwab stockholders and TD Ameritrade stockholders on or about [], 2020.


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WHERE YOU CAN FIND ADDITIONAL INFORMATION

The accompanying document is the joint proxy statement of TD Ameritrade and Schwab for the special meetings of TD Ameritrade stockholders and Schwab stockholders and the prospectus of Schwab for the shares of Schwab common stock to be issued to TD Ameritrade stockholders as consideration in the merger. The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about Schwab and TD Ameritrade from documents that are not included in or delivered with the accompanying joint proxy statement/prospectus. You can obtain the documents incorporated by reference into the accompanying joint proxy statement/prospectus (other than certain exhibits or schedules to these documents), without charge, by requesting them in writing or by telephone from Schwab or TD Ameritrade at the following addresses and telephone numbers, or through the Securities and Exchange Commission website at www.sec.gov:

 

The Charles Schwab Corporation

211 Main Street

San Francisco, California 94105

Attention: Investor Relations

Telephone: (415) 667-7000

  

TD Ameritrade Holding Corporation

200 South 108th Avenue

Omaha, Nebraska 68154

Attention: Investor Relations

Telephone: (800) 669-3900

Email: investor.relations@schwab.com    Email: jeffrey.goeser@tdameritrade.com

In addition, if you have questions about the merger or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, please contact Innisfree M&A Incorporated, the proxy solicitor for TD Ameritrade, toll-free at (877) 456-3422 or collect at (212) 750-5833, or D.F. King & Co., Inc., the proxy solicitor for Schwab, toll-free at (800) 884-5101 or collect at (212) 269-5550. You will not be charged for any of these documents that you request.

If you would like to request documents, please do so no later than five business days before the date of Schwab’s special meeting of stockholders (which meeting date is [], 2020) or five business days before the date of TD Ameritrade’s special meeting of stockholders (which meeting date is [], 2020), as applicable.

See “Where You Can Find More Information” beginning on page 231 of the accompanying joint proxy statement/prospectus for further information.


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LOGO

The Charles Schwab Corporation

211 Main Street

San Francisco, California 94105

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF

THE CHARLES SCHWAB CORPORATION

TO BE HELD ON [], 2020

To the Stockholders of The Charles Schwab Corporation:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders, which is referred to in this notice as the Schwab special meeting, of The Charles Schwab Corporation, a Delaware corporation, which is referred to in this notice as Schwab, will be held on [], at [], located at [], at [], local time, for the following purposes:

 

   

Approval of the share issuance. To consider and vote on a proposal to approve the issuance of Schwab common shares, which is referred to in this notice as the share issuance, as consideration in the merger contemplated by the Agreement and Plan of Merger, dated as of November 24, 2019, by and among Schwab, Americano Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Schwab, and TD Ameritrade Holding Corporation, a Delaware corporation, which is referred to in this notice as TD Ameritrade, as it may be amended from time to time, which is referred to in this notice as the merger agreement, pursuant to which Americano Acquisition Corp. will be merged with and into TD Ameritrade, which is referred to in this notice as the merger, with TD Ameritrade surviving the merger as a wholly owned subsidiary of Schwab;

 

   

Approval of the Schwab charter amendment. To consider and vote on a proposal to approve an amendment to the fifth amended and restated certificate of incorporation of Schwab to create a new class of nonvoting common stock, which amendment is referred to in this notice as the Schwab charter amendment; and

 

   

Adjournment of the Schwab special meeting. To consider and vote on a proposal to approve the adjournment of the Schwab special meeting from time to time if necessary to solicit additional proxies if there are not sufficient votes to approve the share issuance or the Schwab charter amendment at the time of the Schwab special meeting or any adjournment or postponement thereof, which is referred to in this notice as the Schwab adjournment proposal.

Schwab will transact no other business at the Schwab special meeting, except such business as may properly be brought before the Schwab special meeting or any adjournment or postponement thereof. Please refer to the accompanying joint proxy statement/prospectus for further information with respect to the business to be transacted at the Schwab special meeting.

The Schwab board of directors has fixed the close of business on [], 2020 as the record date for the determination of the stockholders entitled to vote at the Schwab special meeting or any adjournment or postponement thereof, which is referred to in this notice as the Schwab record date. Only stockholders of record as of the close of business on the Schwab record date are entitled to receive notice of, and to vote at, the Schwab special meeting or any adjournment or postponement thereof.

If you plan to attend the Schwab special meeting, in accordance with Schwab’s security procedures, you will be asked to present picture identification to enter the Schwab special meeting.


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If you are a beneficial owner of shares of Schwab common stock held in “street name,” meaning that your shares are held by a broker, bank, nominee or other holder of record, at the Schwab record date, in addition to proper identification, you will also need to provide an account statement or letter from the nominee indicating that you were the beneficial owner of the shares at the Schwab record date to be admitted to the Schwab special meeting. If you want to vote your shares of Schwab common stock held in “street name” in person at the Schwab special meeting, you will have to obtain a legal proxy in your name from the broker, bank, nominee or other holder of record who holds your shares.

Approval of the share issuance requires the holders of a majority of shares of Schwab common stock present in person or by proxy at the Schwab special meeting approving the share issuance (which meets or exceeds the minimum requirement under the rules of the New York Stock Exchange of the affirmative vote of a majority of the votes cast by holders of shares of Schwab common stock). Approval of the Schwab charter amendment requires the affirmative vote of the holders of a majority of the shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting. Approval of the Schwab adjournment proposal requires the affirmative vote of the holders of a majority of shares of Schwab common stock that are present in person or represented by proxy at the Schwab special meeting and entitled to vote at the Schwab special meeting, whether or not a quorum is present.

The Schwab board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the share issuance and the Schwab charter amendment, are advisable and fair to, and in the best interests of, Schwab and the Schwab stockholders, and unanimously recommends that Schwab stockholders vote “FOR” the approval of the share issuance, “FOR” the approval of the Schwab charter amendment and “FOR” the Schwab adjournment proposal.

By order of the Schwab board of directors,

Peter J. Morgan III

Executive Vice President, General Counsel and Corporate Secretary

San Francisco, California

[●], 2020

IMPORTANT INFORMATION IF YOU PLAN TO ATTEND THE SCHWAB SPECIAL MEETING IN PERSON

Do not forget your picture identification (e.g., a driver’s license or passport).

If you hold shares of Schwab common stock through a brokerage account (in “street name”), you will also need an account statement or letter from the nominee indicating that you were the beneficial owner of the shares at the Schwab record date to be admitted to the Schwab special meeting.

YOUR VOTE IS IMPORTANT!

WHETHER OR NOT YOU EXPECT TO ATTEND THE SCHWAB SPECIAL MEETING IN PERSON, IT IS IMPORTANT THAT YOUR SHARES OF SCHWAB COMMON STOCK BE REPRESENTED. WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE VIA THE INTERNET, BY TELEPHONE OR BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE SCHWAB SPECIAL MEETING AND WISH TO VOTE YOUR SHARES IN PERSON, YOU MAY DO SO AT ANY TIME PRIOR TO THE CLOSING OF THE POLLS AT THE SCHWAB SPECIAL MEETING.


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We urge you to read the accompanying joint proxy statement/prospectus, including all documents incorporated by reference into the accompanying joint proxy statement/prospectus, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the merger agreement, the share issuance, the Schwab charter amendment, the Schwab adjournment proposal, the Schwab special meeting or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus or need help submitting your proxy for your shares of Schwab common stock, please contact:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Telephone Toll-Free: (800) 884-5101

Telephone Call Collect: (212) 269-5550

Email: schw@dfking.com

or

The Charles Schwab Corporation

211 Main Street

San Francisco, California 94105

Attention: Investor Relations

Telephone: (415) 667-7000

Email: investor.relations@schwab.com


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LOGO

TD Ameritrade Holding Corporation

200 South 108th Avenue

Omaha, Nebraska 68154

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

OF TD AMERITRADE HOLDING CORPORATION

TO BE HELD ON [], 2020

To the Stockholders of TD Ameritrade Holding Corporation:

We are pleased to invite you to attend—and notice is hereby given that TD Ameritrade Holding Corporation, a Delaware corporation, which is referred to in this notice as TD Ameritrade, will hold—a special meeting of its stockholders, which is referred to in this notice as the TD Ameritrade special meeting, on [], at [], located at [], at [], local time, for the following purposes:

 

  1.

Approval and adoption of the merger agreement. To consider and vote on a proposal to approve and adopt the Agreement and Plan of Merger, dated as of November 24, 2019, by and among The Charles Schwab Corporation, Americano Acquisition Corp. and TD Ameritrade, as it may be amended from time to time, which is referred to in this notice as the merger agreement, a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus;

 

  2.

TD Ameritrade merger-related compensation. To consider and vote on a proposal to approve, on a non-binding, advisory basis, certain compensation arrangements that may be paid or become payable to TD Ameritrade’s named executive officers in connection with the merger contemplated by the merger agreement, which is referred to in this notice as the TD Ameritrade merger-related compensation proposal; and

 

  3.

Adjournment of the TD Ameritrade special meeting. To consider and vote on a proposal to approve the adjournment of the TD Ameritrade special meeting from time to time if necessary to solicit additional proxies if there are not sufficient votes to approve and adopt the merger agreement at the time of the TD Ameritrade special meeting or any adjournment or postponement thereof, which is referred to in this notice as the TD Ameritrade adjournment proposal.

TD Ameritrade will transact no other business at the TD Ameritrade special meeting, except such business as may properly be brought before the TD Ameritrade special meeting or any adjournment or postponement thereof. Please refer to the accompanying joint proxy statement/prospectus for further information with respect to the business to be transacted at the TD Ameritrade special meeting.

The TD Ameritrade board of directors has fixed the close of business on [], 2020 as the record date for the TD Ameritrade special meeting, which is referred to in this notice as the TD Ameritrade record date. Only holders of record of TD Ameritrade common stock as of the close of business on the TD Ameritrade record date are entitled to receive notice of, and to vote at, the TD Ameritrade special meeting or any adjournment or postponement thereof.

The TD Ameritrade board of directors, acting upon the unanimous recommendation of a strategic development committee of the TD Ameritrade board of directors composed solely of independent and disinterested directors, unanimously recommends that TD Ameritrade stockholders vote “FOR” the approval and adoption of the merger agreement, “FOR” the TD Ameritrade merger-related compensation proposal and “FOR” the TD Ameritrade adjournment proposal.


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By order of the Board of Directors,
 

 

Joseph H. Moglia

Chairman of the Board

Omaha, Nebraska

[●], 2020

Your vote is very important, regardless of the number of shares of TD Ameritrade common stock that you own. Whether or not you expect to attend the TD Ameritrade special meeting in person, to ensure your representation at the TD Ameritrade special meeting, we urge you to submit a proxy to vote your shares as promptly as possible via the Internet, by telephone or by submitting your proxy card by mail using the postage-paid envelope provided. If your shares are held in the name of a broker, bank, nominee or other holder of record, please follow the instructions on the voting instruction form furnished to you by such broker, bank, nominee or other holder of record.

The accompanying joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the TD Ameritrade special meeting. We urge you to carefully read the accompanying joint proxy statement/prospectus, including any documents incorporated by reference, and the annexes in their entirety. If you have any questions concerning the proposals in this notice, the merger or the accompanying joint proxy statement/prospectus, would like additional copies or need help voting your shares of TD Ameritrade common stock, please contact TD Ameritrade’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders Call Toll-Free: (877) 456-3422

Banks and Brokers Call Collect: (212) 750-5833


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TABLE OF CONTENTS

 

     Page  

Questions and Answers

     1  

Summary

     18  

Selected Historical Financial Data of Schwab

     39  

Selected Historical Financial Data of TD Ameritrade

     41  

Selected Unaudited Pro Forma Condensed Combined Financial Data

     43  

Comparative Historical and Unaudited Pro Forma Per Share Data

     44  

Comparative Per Share Market Price and Dividend Information

     46  

Schwab Unaudited Pro Forma Condensed Combined Financial Statements

     48  

Risk Factors

     66  

Cautionary Statement Regarding Forward-Looking Statements

     75  

The Companies

     76  

The Schwab Special Meeting

     78  

The TD Ameritrade Special Meeting

     84  

The Merger

     92  

General

     92  

The Parties

     92  

Background of the Merger

     93  

Certain Relationships between Schwab and TD Ameritrade

     107  

TD Ameritrade’s Reasons for the Merger; Recommendation of the Strategic Development Committee and the TD Ameritrade Board of Directors

     107  

Schwab’s Reasons for the Merger; Recommendation of the Schwab Board of Directors

     114  

Opinions of the Strategic Development Committee’s Financial Advisors

     118  

Opinion of Schwab’s Financial Advisor

     132  

Unaudited Prospective Financial Information

     138  

Regulatory Approvals Required for the Merger

     147  

No Appraisal Rights

     151  

Accounting Treatment

     151  

Listing of Shares of Schwab Common Stock and Delisting and Deregistration of Shares of TD Ameritrade Common Stock

     151  

The Merger Agreement

     152  

Material U.S. Federal Income Tax Consequences of the Merger

     177  

The Schwab Charter Amendment

     180  

The Voting Agreements

     182  

The Stockholder Agreement

     186  

The Registration Rights Agreement

     188  

The Letter Agreement

     189  

The Insured Deposit Account Agreement

     190  

Interests of Certain Persons in the Merger

     191  

Interests of Schwab’s Directors and Executive Officers in the Merger

     191  

Interests of TD Ameritrade’s Directors and Executive Officers in the Merger

     191  

TD Ameritrade Proposal I: Approval and Adoption of the Merger Agreement

     200  

TD Ameritrade Proposal II: Advisory Vote on TD Ameritrade Merger-Related Compensation

     201  

TD Ameritrade Proposal III: Approval of the TD Ameritrade Adjournment Proposal

     202  

Schwab Proposal I: Approval of the Share Issuance

     203  

Schwab Proposal II: Approval of the Schwab Charter Amendment

     204  

Schwab Proposal III: Approval of the Schwab Adjournment Proposal

     205  

Description of Schwab Capital Stock

     206  

Comparison of Stockholder Rights

     212  

 

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     Page  

Experts

     227  

Legal Matters

     228  

Future Schwab Stockholder Proposals

     229  

Future TD Ameritrade Stockholder Proposals

     230  

Where You Can Find More Information

     231  

Annexes

  

Annex A: Agreement and Plan of Merger

     A-1  

Annex B: The Schwab Charter Amendment

     B-1  

Annex C: Voting and Support Agreement between The Charles Schwab Corporation and The Toronto-Dominion Bank

     C-1  

Annex D: Voting and Support Agreement among The Charles Schwab Corporation, J. Joe Ricketts and Marlene Ricketts and certain other stockholders

     D-1  

Annex E: Voting and Support Agreement among TD Ameritrade Holding Corporation, Charles R. Schwab and Helen O’Neill Schwab

     E-1  

Annex F: Stockholder Agreement between The Charles Schwab Corporation and The Toronto-Dominion Bank

     F-1  

Annex G: Registration Rights Agreement among The Charles Schwab Corporation, Charles R. Schwab, The Toronto-Dominion Bank and certain other stockholders

     G-1  

Annex H: Letter Agreement among TD Ameritrade Holding Corporation, The Charles Schwab Corporation and Americano Acquisition Corp. and The Toronto-Dominion Bank

     H-1  

Annex I: Amended and Restated Insured Deposit Account Agreement among TD Bank USA, National Association, TD Bank, National Association and The Charles Schwab Corporation

     I-1  

Annex J: Opinion of PJT Partners, LP

     J-1  

Annex K: Opinion of Piper Sandler & Co.

     K-1  

Annex L: Opinion of Credit Suisse Securities (USA) LLC

     L-1  

 

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QUESTIONS AND ANSWERS

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger and the matters to be addressed at the special meetings. These questions and answers may not address all questions that may be important to TD Ameritrade stockholders or Schwab stockholders. To better understand these matters, and for a description of the legal terms governing the merger, you should carefully read this entire joint proxy statement/prospectus, including the attached annexes, as well as the documents that have been incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” in this joint proxy statement/prospectus. All references in this joint proxy statement/prospectus to TD Ameritrade refer to TD Ameritrade Holding Corporation, a Delaware corporation; all references in this joint proxy statement/prospectus to Schwab refer to The Charles Schwab Corporation, a Delaware corporation; all references in this joint proxy statement/prospectus to Merger Sub refer to Americano Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Schwab; and all references in this joint proxy statement/prospectus to the merger agreement refer to the Agreement and Plan of Merger, dated as of November 24, 2019, by and among TD Ameritrade, Schwab and Merger Sub, as it may be amended from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus.

 

Q:

Why am I receiving this document?

 

A:

Schwab and TD Ameritrade have agreed to a merger, pursuant to which TD Ameritrade will become a wholly owned subsidiary of Schwab and will no longer be a publicly held corporation in a transaction that is referred to in this joint proxy statement/prospectus as the merger. If the merger is completed, each outstanding share of TD Ameritrade common stock (except for shares of TD Ameritrade common stock held by TD Ameritrade as treasury stock or by Schwab (other than any such shares that are owned by TD Ameritrade, Schwab or any of their respective subsidiaries (x) in a fiduciary, representative or other capacity on behalf of other persons, whether or not held in a separate account or (y) as a result of debts previously contracted, which are referred to in this joint proxy statement/prospectus as fiduciary shares) which will be cancelled without payment), par value $0.01 per share, which is referred to in this joint proxy statement/prospectus as the TD Ameritrade common stock, will automatically be cancelled and converted into the right to receive 1.0837 shares of common stock, par value $0.01 per share, of Schwab, which is referred to in this joint proxy statement/prospectus as the Schwab common stock, except that The Toronto-Dominion Bank, a Canadian-chartered bank, which is referred to in this joint proxy statement/prospectus as TD Bank, and its affiliates will receive Schwab common stock only up to a maximum of the voting limitation percentage (as defined in this joint proxy statement/prospectus) of the Schwab common stock (including any other shares of Schwab common stock then owned by TD Bank and its affiliates) and will otherwise receive shares of nonvoting common stock, par value $0.01 per share, of Schwab, which is referred to in this joint proxy statement/prospectus as the Schwab nonvoting common stock, and together with the Schwab common stock, as the Schwab common shares. In order to complete the merger, TD Ameritrade stockholders must vote to approve and adopt the merger agreement and Schwab stockholders must vote to approve the issuance of Schwab common shares to TD Ameritrade stockholders in the merger, which is referred to in this joint proxy statement/prospectus as the share issuance, and to amend the fifth amended and restated certificate of incorporation of Schwab, which is referred to in this joint proxy statement/prospectus as the Schwab charter, to create the class of Schwab nonvoting common stock, which is referred to in this joint proxy statement/prospectus as the Schwab charter amendment.

TD Ameritrade is holding a special meeting of stockholders, which is referred to in this joint proxy statement/prospectus as the TD Ameritrade special meeting, in order to obtain the stockholder approval necessary to approve and adopt the merger agreement. TD Ameritrade stockholders will also be asked to approve, on a non-binding, advisory basis, certain compensation arrangements that may be paid or become payable to TD Ameritrade’s named executive officers in connection with the merger contemplated by the merger agreement, which is referred to in this joint proxy statement/prospectus as the TD Ameritrade merger-related compensation proposal. TD Ameritrade stockholders will also be asked to approve the

 

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adjournment of the TD Ameritrade special meeting from time to time if necessary to solicit additional proxies if there are not sufficient votes to approve and adopt the merger agreement at the time of the TD Ameritrade special meeting or any adjournment or postponement thereof, which is referred to in this joint proxy statement/prospectus as the TD Ameritrade adjournment proposal.

Schwab is holding a special meeting of stockholders, which is referred to in this joint proxy statement/prospectus as the Schwab special meeting, in order to obtain the stockholder approval necessary to approve the share issuance and the Schwab charter amendment. Schwab stockholders will also be asked to approve the adjournment of the Schwab special meeting from time to time if necessary to solicit additional proxies if there are not sufficient votes to approve the share issuance or the Schwab charter amendment at the time of the Schwab special meeting or any adjournment or postponement thereof, which is referred to in this joint proxy statement/prospectus as the Schwab adjournment proposal.

This document is being delivered to you as both a joint proxy statement of TD Ameritrade and Schwab and a prospectus of Schwab in connection with the merger. It is the proxy statement by which the TD Ameritrade board of directors is soliciting proxies from TD Ameritrade stockholders to vote at the TD Ameritrade special meeting, or at any adjournment or postponement of the TD Ameritrade special meeting, on the approval and adoption of the merger agreement, the approval of the TD Ameritrade merger-related compensation proposal and the approval of the TD Ameritrade adjournment proposal. It is also the proxy statement by which the Schwab board of directors is soliciting proxies from Schwab stockholders to vote at the Schwab special meeting, or at any adjournment or postponement of the Schwab special meeting, on the approval of the share issuance, the Schwab charter amendment and the Schwab adjournment proposal. In addition, this document is the prospectus by which Schwab will issue shares of Schwab common stock to TD Ameritrade stockholders (other than TD Bank and its affiliates) in the merger.

Your vote is important. We encourage you to vote as soon as possible.

 

Q:

What will TD Ameritrade stockholders receive in the merger?

 

A:

If the merger is completed, each share of TD Ameritrade common stock (except for shares of TD Ameritrade common stock held by TD Ameritrade as treasury stock or by Schwab (other than any fiduciary shares) which will be cancelled without payment) will automatically be cancelled and converted into the right to receive 1.0837 shares of Schwab common stock, except that TD Bank and its affiliates will receive Schwab common stock only up to a maximum of the voting limitation percentage (as defined in this joint proxy statement/prospectus) of the Schwab common stock (including any other shares of Schwab common stock then owned by TD Bank and its affiliates) and will otherwise receive shares of Schwab nonvoting common stock. Each TD Ameritrade stockholder will receive cash for any fractional share of Schwab common stock that the stockholder would otherwise receive in the merger (after aggregating the total number of shares of Schwab common stock to be received by such stockholder in the merger). The Schwab common shares and cash for any fractional shares of Schwab common stock to be received by TD Ameritrade stockholders in the merger are collectively referred to in this joint proxy statement/prospectus as the merger consideration.

Based on the closing price of a share of Schwab common stock on the New York Stock Exchange, which is referred to in this joint proxy statement/prospectus as the NYSE, of $44.75 on November 20, 2019, the last trading day prior to the publication of media reports regarding the merger, and of $48.20 on November 22, 2019, the last trading day prior to public announcement of the merger by Schwab and TD Ameritrade, the implied value of the per share merger consideration was approximately $48.50 and $52.23, respectively, in value for each share of TD Ameritrade common stock. Based on the closing price of a share of Schwab common stock on the NYSE on [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, the merger consideration represented approximately $[●] in value for each share of TD Ameritrade common stock. Because Schwab will issue a fixed number of Schwab common shares in exchange for each share of TD Ameritrade common stock, the value of the merger consideration that TD Ameritrade stockholders will receive in the merger will depend on the market

 

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price of Schwab common stock at the time the merger is completed. The market price of Schwab common stock when TD Ameritrade stockholders receive those shares after the merger is completed could be greater than, less than or the same as the market price of shares of Schwab common stock on the date of this joint proxy statement/prospectus or at the time of the TD Ameritrade special meeting.

 

Q:

What is the Schwab charter amendment?

 

A:

Concurrently with the completion of the merger, and subject to obtaining the approval of the Schwab stockholders at the Schwab special meeting, Schwab will amend the Schwab charter to create the Schwab nonvoting common stock, a new class of shares to be issued to TD Bank and its affiliates as merger consideration. Pursuant to the Schwab charter amendment, the number of authorized shares of Schwab capital stock will increase by 300 million, and Schwab will be authorized to issue 300 million shares of Schwab nonvoting common stock, each with a par value of $0.01 per share.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger is not completed for any reason, TD Ameritrade stockholders will not receive any consideration for their shares of TD Ameritrade common stock. Instead, TD Ameritrade will remain an independent public company and the TD Ameritrade common stock will continue to be listed and traded on the NASDAQ Global Select Market, which is referred to in this joint proxy statement/prospectus as NASDAQ.

In the event of a termination of the merger agreement under certain circumstances, Schwab or TD Ameritrade may be required to pay a termination fee of $950 million to the other party. In addition, if Schwab or TD Ameritrade does not obtain the required vote of the Schwab stockholders at the Schwab special meeting or the TD Ameritrade stockholders at the TD Ameritrade special meeting, as applicable, and the merger agreement is terminated in certain circumstances, that party would be required to reimburse the other party for its out-of-pocket fees and expenses actually incurred or accrued in connection with or related to the transactions contemplated by the merger agreement, up to an aggregate amount of $50 million. If the termination fee is also payable by such party, the expense reimbursement payment will be credited against the termination fee.

 

Q:

What are TD Ameritrade stockholders being asked to consider and vote on?

 

A:

TD Ameritrade stockholders are being asked to consider and vote on the following:

 

   

to approve and adopt the merger agreement, pursuant to which Merger Sub (as defined in this joint proxy statement/prospectus), will be merged with and into TD Ameritrade, with TD Ameritrade continuing as the surviving corporation and a wholly owned subsidiary of Schwab;

 

   

to approve, on a non-binding, advisory basis, the TD Ameritrade merger-related compensation proposal; and

 

   

to approve the TD Ameritrade adjournment proposal.

The approval and adoption of the merger agreement by TD Ameritrade stockholders is a condition to the obligations of TD Ameritrade, Schwab and Merger Sub to complete the merger. The approval of the TD Ameritrade merger-related compensation proposal and the TD Ameritrade adjournment proposal is not a condition to the obligation of TD Ameritrade, Schwab or Merger Sub to complete the merger.

 

Q:

What are Schwab stockholders being asked to consider and vote on?

 

A:

Schwab stockholders are being asked to consider and vote on the following:

 

   

to approve the share issuance;

 

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to approve the Schwab charter amendment; and

 

   

to approve the Schwab adjournment proposal.

The approval of the share issuance and the Schwab charter amendment by Schwab stockholders are conditions to the obligations of TD Ameritrade, Schwab and Merger Sub to complete the merger. The approval of the Schwab adjournment proposal is not a condition to the obligation of TD Ameritrade, Schwab or Merger Sub to complete the merger.

 

Q:

Does the TD Ameritrade board of directors recommend that TD Ameritrade stockholders approve and adopt the merger agreement?

 

A:

Yes. The TD Ameritrade board of directors, acting upon the unanimous recommendation of a strategic development committee of the TD Ameritrade board of directors composed solely of independent and disinterested directors, which is referred to in this joint proxy statement/prospectus as the strategic development committee, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, TD Ameritrade and TD Ameritrade stockholders, and unanimously recommends that TD Ameritrade stockholders vote “FOR” the approval and adoption of the merger agreement. See “TD Ameritrade Proposal I: Approval and Adoption of the Merger Agreement” and “The Merger—TD Ameritrade’s Reasons for the Merger; Recommendation of the Strategic Development Committee and the TD Ameritrade Board of Directors” beginning on pages 200 and 107, respectively, of this joint proxy statement/prospectus.

 

Q:

What is TD Ameritrade merger-related compensation and why am I being asked to consider and vote on it?

 

A:

The Securities and Exchange Commission, which is referred to in this joint proxy statement/prospectus as the SEC, has adopted rules that require TD Ameritrade to seek a non-binding, advisory vote on TD Ameritrade merger-related compensation. TD Ameritrade merger-related compensation is certain compensation that is tied to or based on the merger and that may be paid or become payable to TD Ameritrade’s named executive officers in connection with the merger contemplated by the merger agreement.

 

Q:

Does the TD Ameritrade board of directors recommend that TD Ameritrade stockholders approve the TD Ameritrade merger-related compensation proposal?

 

A:

Yes. The TD Ameritrade board of directors unanimously recommends that TD Ameritrade stockholders vote “FOR” the TD Ameritrade merger-related compensation proposal. See “TD Ameritrade Proposal II: Advisory Vote on TD Ameritrade Merger-Related Compensation” beginning on page 201 of this joint proxy statement/prospectus.

 

Q:

What happens if the TD Ameritrade merger-related compensation proposal is not approved?

 

A:

Approval of the TD Ameritrade merger-related compensation proposal is not a condition to the obligations of TD Ameritrade, Schwab or Merger Sub to complete the merger. The vote is a non-binding, advisory vote. If the merger agreement is approved and adopted and the merger is completed, the TD Ameritrade merger-related compensation will be payable to TD Ameritrade’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the TD Ameritrade merger-related compensation proposal.

 

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Q:

Does the TD Ameritrade board of directors recommend that TD Ameritrade stockholders approve the TD Ameritrade adjournment proposal?

 

A:

Yes. The TD Ameritrade board of directors unanimously recommends that TD Ameritrade stockholders vote “FOR” the TD Ameritrade adjournment proposal. See “TD Ameritrade Proposal III: Approval of the TD Ameritrade Adjournment Proposal” beginning on page 202 of this joint proxy statement/prospectus.

 

Q:

Does the Schwab board of directors recommend that Schwab stockholders approve the share issuance and the Schwab charter amendment?

 

A:

Yes. The Schwab board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the share issuance and the Schwab charter amendment, are advisable and fair to, and in the best interests of, Schwab and the Schwab stockholders, and unanimously recommends that Schwab stockholders vote “FOR” the approval of the share issuance and “FOR” the approval of the Schwab charter amendment. See “Schwab Proposal I: Approval of the Share Issuance,” “Schwab Proposal II: Approval of the Schwab Charter Amendment” and “The Merger—Schwab’s Reasons for the Merger; Recommendation of the Schwab Board of Directors” beginning on pages 203, 204 and 114, respectively, of this joint proxy statement/prospectus.

 

Q:

Does the Schwab board of directors recommend that Schwab stockholders approve the Schwab adjournment proposal?

 

A:

Yes. The Schwab board of directors unanimously recommends that Schwab stockholders vote “FOR” the Schwab adjournment proposal. See “Schwab Proposal III: Approval of the Schwab Adjournment Proposal” beginning on page 205 of this joint proxy statement/prospectus.

 

Q:

What TD Ameritrade stockholder vote is required for the approval of each proposal at the TD Ameritrade special meeting, and what happens if I abstain?

 

A:

The following are the vote requirements for the TD Ameritrade proposals:

 

   

Approval and adoption of the merger agreement: The affirmative vote of (i) the holders of a majority of the shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting and (ii) the holders (other than TD Bank, the significant TD Ameritrade stockholders (as defined in this joint proxy statement/prospectus) and their respective affiliates) of a majority of the shares of TD Ameritrade common stock (other than shares of TD Ameritrade common stock held by TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) outstanding and entitled to vote at the TD Ameritrade special meeting is required to approve and adopt the merger agreement. Accordingly, a TD Ameritrade stockholder’s abstention from voting, the failure of a TD Ameritrade stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TD Ameritrade stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the proposal.

 

   

Approval of TD Ameritrade merger-related compensation: The affirmative vote of the holders of a majority of the total shares of TD Ameritrade common stock present in person or represented by proxy and voting on the matter at the TD Ameritrade special meeting, assuming a quorum is represented at the meeting, is required to approve, on a non-binding, advisory basis, the TD Ameritrade merger-related compensation proposal. Accordingly, assuming a quorum is present, a TD Ameritrade stockholder’s abstention from voting, the failure of a TD Ameritrade stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TD Ameritrade stockholder’s other failure to vote will have no effect on the TD Ameritrade merger-related compensation proposal.

 

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Adjournment (if necessary): The affirmative vote of the holders of a majority of the total shares of TD Ameritrade common stock present in person or represented by proxy and voting on the matter at the TD Ameritrade special meeting, assuming a quorum is represented at the meeting, is required to approve the TD Ameritrade adjournment proposal. Accordingly, assuming a quorum is present, a TD Ameritrade stockholder’s abstention from voting, the failure of a TD Ameritrade stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TD Ameritrade stockholder’s other failure to vote will have no effect on the TD Ameritrade adjournment proposal.

Concurrently with the execution of the merger agreement, TD Bank and the significant TD Ameritrade stockholders each entered into a voting agreement with Schwab, which are referred to in this joint proxy statement/prospectus as the TD Bank voting agreement and the significant TD Ameritrade stockholders voting agreement, respectively, pursuant to which TD Bank and the significant TD Ameritrade stockholders have agreed to vote their shares of TD Ameritrade common stock in favor of the approval and adoption of the merger agreement and the approval of the TD Ameritrade adjournment proposal. As of the TD Ameritrade record date (as defined in this joint proxy statement/prospectus), these shares represent an aggregate of approximately [●]% of the outstanding shares of TD Ameritrade common stock. The TD Bank voting agreement and the significant TD Ameritrade stockholders voting agreement may be terminated under certain circumstances. Copies of the TD Bank voting agreement and the significant TD Ameritrade stockholders voting agreement are attached as Annexes C and D, respectively, to this joint proxy statement/prospectus. For additional information, see “The Voting Agreements—The TD Bank Voting Agreement” and “The Voting Agreements—The Significant TD Ameritrade Stockholders Voting Agreement” beginning on pages 182 and 183, respectively, of this joint proxy statement/prospectus.

 

Q:

What Schwab stockholder vote is required for the approval of each proposal at the Schwab special meeting, and what happens if I abstain?

 

A:

The following are the vote requirements for the Schwab proposals:

 

   

Share issuance: Approval of the share issuance under the rules of the NYSE requires the affirmative vote of a majority of the votes cast at the Schwab special meeting by holders of shares of Schwab common stock. Under the current rules and interpretive guidance of the NYSE, an abstention is considered a vote cast for purposes of this vote. Approval of the share issuance under Schwab’s amended and restated bylaws, which are referred to in this joint proxy statement/prospectus as the Schwab bylaws, requires the affirmative vote of the holders of a majority of shares of Schwab common stock present at the Schwab special meeting in person or by proxy and entitled to vote at the Schwab special meeting, a quorum being present. Under either voting standard, an abstention from voting will have the same effect as a vote “AGAINST” the proposal. Also under either voting standard, assuming a quorum is present, the failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have no effect on the vote to approve the share issuance. Because the voting standard set forth in the Schwab bylaws is the same or greater than the voting standard set forth in the rules of the NYSE, the voting standard set forth in the Schwab bylaws is the applicable vote on the share issuance.

 

   

Schwab charter amendment: The affirmative vote of the holders of a majority of the shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting is required to approve the Schwab charter amendment. A Schwab stockholder’s abstention from voting, the failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the Schwab charter amendment.

 

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Adjournment (if necessary): The affirmative vote of the holders of a majority of shares of Schwab common stock that are present at the Schwab special meeting in person or by proxy and entitled to vote at the Schwab special meeting, whether or not a quorum is present, is required to approve the Schwab adjournment proposal. Accordingly, a Schwab stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the proposal. The failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have no effect on the Schwab adjournment proposal.

Concurrently with the execution of the merger agreement, certain Schwab stockholders, who are referred to in this joint proxy statement/prospectus as the significant Schwab stockholders, entered into a voting agreement with TD Ameritrade, which is referred to in this joint proxy statement/prospectus as the significant Schwab stockholders voting agreement, pursuant to which they have agreed to vote their shares of Schwab common stock in favor of the approval of the share issuance, the Schwab charter amendment and the Schwab adjournment proposal. As of the Schwab record date, these shares represent an aggregate of approximately [●]% of the outstanding shares of Schwab common stock. The significant Schwab stockholders voting agreement may be terminated under certain circumstances. A copy of the significant Schwab stockholders voting agreement is attached as Annex E to this joint proxy statement/prospectus. For additional information, see “The Voting Agreements—The Significant Schwab Stockholders Voting Agreement” beginning on page 184 of this joint proxy statement/prospectus.

 

Q:

What constitutes a quorum for the TD Ameritrade special meeting?

 

A:

TD Ameritrade’s by-laws provide that the holders of a majority of the voting power of all outstanding shares of capital stock of TD Ameritrade entitled to vote, present in person or represented by proxy, will constitute a quorum for the transaction of business at the TD Ameritrade special meeting. Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the TD Ameritrade special meeting. Shares of TD Ameritrade common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record, and shares of TD Ameritrade common stock with respect to which the beneficial owner otherwise fails to vote, will not be deemed present at the TD Ameritrade special meeting for the purpose of determining the presence of a quorum.

 

Q:

What constitutes a quorum for the Schwab special meeting?

 

A:

The Schwab bylaws provide that the holders of a majority in voting interest of the outstanding shares of Schwab common stock entitled to vote, present in person or by proxy, will constitute a quorum for the transaction of business at the Schwab special meeting. Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the Schwab special meeting. Shares of Schwab common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record, and shares of Schwab common stock with respect to which the beneficial owner otherwise fails to vote, will not be deemed present at the Schwab special meeting for the purpose of determining the presence of a quorum.

 

Q:

Who is entitled to vote at the TD Ameritrade special meeting, and how many votes does each holder of TD Ameritrade common stock have?

 

A:

All holders of TD Ameritrade common stock who held shares at the close of business on [], 2020, which is referred to in this joint proxy statement/prospectus as the TD Ameritrade record date, are entitled to receive notice of, and to vote at, the TD Ameritrade special meeting or any adjournment or postponement thereof, provided that those shares remain outstanding on the date of the TD Ameritrade special meeting. As of the close of business on the TD Ameritrade record date, there were [●] shares of TD Ameritrade common stock

 

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  outstanding and entitled to vote at the TD Ameritrade special meeting. Each holder of TD Ameritrade common stock is entitled to one vote on each proposal to be considered at the TD Ameritrade special meeting for each share of TD Ameritrade common stock owned at the TD Ameritrade record date.

 

Q:

Who is entitled to vote at the Schwab special meeting, and how many votes does each holder of Schwab common stock have?

 

A:

All holders of Schwab common stock who held shares at the close of business on [], 2020, which is referred to in this joint proxy statement/prospectus as the Schwab record date, are entitled to receive notice of, and to vote at, the Schwab special meeting or any adjournment or postponement thereof, provided that those shares remain outstanding on the date of the Schwab special meeting. As of the close of business on the Schwab record date, there were [●] shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting. Each holder of Schwab common stock is entitled to one vote on each proposal to be considered at the Schwab special meeting for each share of Schwab common stock owned at the Schwab record date.

 

Q:

What if I hold shares in both TD Ameritrade and Schwab?

 

A:

If you are both a TD Ameritrade stockholder and a Schwab stockholder, you will receive separate packages of proxy materials from each company. A vote as a TD Ameritrade stockholder for the approval and adoption of the merger agreement will not constitute a vote as a Schwab stockholder to approve the share issuance or the Schwab charter amendment, or vice versa. Therefore, please sign, date, mark and return all proxy cards and/or voting instructions that you receive from TD Ameritrade or Schwab, or submit them over the Internet or by telephone.

 

Q:

When and where is the TD Ameritrade special meeting?

 

A:

The TD Ameritrade special meeting will be held on [], 2020, at [], located at [], at [], local time.

 

Q:

When and where is the Schwab special meeting?

 

A:

The Schwab special meeting will be held on [], 2020, at [], located at [], at [], local time.

 

Q:

How do I vote my shares at the TD Ameritrade special meeting?

 

A:

Voting of Proxies by Holders of Record

If you were the record holder of shares of TD Ameritrade common stock as of the TD Ameritrade record date, you may submit your proxy to vote such shares via the Internet, by telephone or by mail. If you hold shares through the TD Ameritrade 401(k) Plan (as defined in this joint proxy statement/prospectus), see “The TD Ameritrade Special Meeting—Voting Your Shares Held through the TD Ameritrade 401(k) Plan by Proxy” beginning on page 88 of this joint proxy statement/prospectus for information regarding how to vote your shares held under the TD Ameritrade 401(k) Plan.

Voting via the Internet or by Telephone

 

   

To submit your proxy via the Internet, go to the website listed on your enclosed TD Ameritrade proxy card. Have your TD Ameritrade proxy card in hand when you access the website and follow the instructions to vote your shares of TD Ameritrade common stock.

 

   

To submit your proxy by telephone, call []. Have your TD Ameritrade proxy card in hand when you call and follow the instructions to vote your shares of TD Ameritrade common stock.

 

   

If you vote via the Internet or by telephone, you must do so no later than [] on [], 2020.

 

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Voting by Mail

As an alternative to submitting your proxy via the Internet or by telephone, you may submit your proxy by mail.

 

   

To submit your proxy by mail, simply mark your TD Ameritrade proxy card, date and sign it and return it in the postage-paid envelope. If you do not have the postage-paid envelope, please mail your completed TD Ameritrade proxy card to the following address: [].

 

   

If you vote by mail, your TD Ameritrade proxy card must be received no later than [] on [], 2020.

Please carefully consider the information contained in this joint proxy statement/prospectus and, whether or not you plan to attend the TD Ameritrade special meeting, vote via the Internet, by telephone or by mail so that your shares of TD Ameritrade common stock will be voted in accordance with your wishes even if you later decide not to attend the TD Ameritrade special meeting.

We encourage you to register your vote via the Internet or by telephone. If you attend the TD Ameritrade special meeting, you may also submit your vote in person, in which case any votes that you previously submitted—whether via the Internet, by telephone or by mail—will be superseded by the vote that you cast at the TD Ameritrade special meeting. Whether your proxy is submitted via the Internet, by telephone or by mail, if it is properly completed and submitted, and if you do not revoke it prior to or at the TD Ameritrade special meeting, your shares of TD Ameritrade common stock will be voted at the TD Ameritrade special meeting in the manner set forth in this joint proxy statement/prospectus or as otherwise specified by you. Again, you may vote via the Internet or by telephone until [] on [], 2020, or TD Ameritrade’s transfer agent must receive your paper proxy card by mail no later than [] on [], 2020.

Voting of Shares Held in Street Name

If your shares of TD Ameritrade common stock are held in an account at a broker, bank, nominee or other holder of record (i.e., in “street name”), you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the broker, bank, nominee or other holder of record. You may not vote shares held in street name by returning a TD Ameritrade proxy card directly to TD Ameritrade or by voting in person at the TD Ameritrade special meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank, nominee or other holder of record. See “The TD Ameritrade Special Meeting—Voting of Shares Held in Street Name” beginning on page 88 of this joint proxy statement/prospectus.

 

Q:

If my shares of TD Ameritrade common stock are held in “street name,” will my broker, bank, nominee or other holder of record automatically vote my shares for me?

 

A:

No. If your shares of TD Ameritrade common stock are held in “street name,” you must instruct the broker, bank, nominee or other holder of record on how to vote your shares. Your broker, bank, nominee or other holder of record will vote your shares of TD Ameritrade common stock only if you provide instructions on how to vote by filling out the voting instruction form sent to you by your broker, bank, nominee or other holder of record with this joint proxy statement/prospectus.

 

Q:

How will my shares of TD Ameritrade common stock be represented at the TD Ameritrade special meeting, and what will happen if I return my proxy card without indicating how to vote?

 

A:

All properly signed proxies that are timely received and that are not revoked will be voted at the TD Ameritrade special meeting according to the instructions indicated on the proxies or, if no direction is indicated, they will be voted as recommended by the TD Ameritrade board of directors.

 

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Q: Where do I find the voting results of the TD Ameritrade special meeting?

 

A:

TD Ameritrade will announce preliminary voting results at the TD Ameritrade special meeting. TD Ameritrade will announce the final results on a Form 8-K following the TD Ameritrade special meeting. You may access a copy electronically on TD Ameritrade’s website at www.amtd.com/investor-relations by clicking on “SEC Filings” or through the SEC’s electronic data system at www.sec.gov.

Voting results are tabulated and certified by TD Ameritrade’s transfer agent, Computershare Trust Company, N.A.

 

Q:

How do I vote my shares at the Schwab special meeting?

 

A:

Via the Internet or by Telephone

If you hold shares of Schwab common stock directly in your name as a stockholder of record, you may vote via the Internet or by telephone by following the instructions provided on your proxy card. Votes submitted via the Internet or by telephone must be received by 11:59 p.m. (Central Time) on [], 2020.

If you hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, you may vote via the Internet or by telephone only if Internet or telephone voting is made available by your broker, bank, nominee or other holder of record. Please follow the instructions on your voting instruction form provided by your broker, bank, nominee or other holder of record with these materials.

By Mail

If you hold shares of Schwab common stock directly in your name as a stockholder of record, you will need to complete, sign and date your proxy card and return it using the postage-paid return envelope provided or return it to Schwab’s transfer agent, Equiniti Trust Company. You must mail your proxy card so that Schwab’s transfer agent receives it no later than [], 2020.

If you hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, to vote by mail, you will need to sign, date and mark the voting instruction form provided by your broker, bank, nominee or other holder of record and return it in the postage-paid return envelope provided. Your broker, bank, nominee or other holder of record must receive your voting instruction form in sufficient time to vote your shares of Schwab common stock.

In Person

If you hold shares of Schwab common stock directly in your name as a stockholder of record, you may vote in person at the Schwab special meeting. Stockholders of record also may be represented by another person at the Schwab special meeting by executing a proper proxy designating that person and having that proper proxy be presented to the inspector of election with the applicable ballot at the Schwab special meeting.

If you hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, you must obtain a written legal proxy from that institution and present it to the inspector of election with your ballot to be able to vote in person at the Schwab special meeting. To request a legal proxy, please contact your broker, bank, nominee or other holder of record.

Please carefully consider the information contained in this joint proxy statement/prospectus and, whether or not you plan to attend the Schwab special meeting, submit your proxy via the Internet, by telephone or by mail so that your shares of Schwab common stock will be voted in accordance with your wishes even if you later decide not to attend the Schwab special meeting.

When a stockholder of record submits a proxy via the Internet or by telephone, his or her proxy is recorded immediately. We encourage you to submit your proxy via the Internet or by telephone whenever possible. If

 

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you submit a proxy via the Internet or by telephone, please do not return your proxy card by mail. If you attend the Schwab special meeting, you may also submit your vote in person, in which case any proxies that you previously submitted—whether via the Internet, by telephone or by mail—will be superseded by the vote that you cast at the Schwab special meeting. To vote in person at the Schwab special meeting, beneficial owners who hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record will need to contact the broker, bank, nominee or other holder of record to obtain a legal proxy to bring to the meeting. Whether your proxy is submitted via the Internet, by telephone or by mail, if it is properly completed and submitted, and if you do not revoke it prior to or at the Schwab special meeting, your shares of Schwab common stock will be voted at the Schwab special meeting in the manner set forth in this joint proxy statement/prospectus or as otherwise specified by you. Again, you may submit your proxy via the Internet or by telephone until 11:59 p.m. Central Time on [], 2020, or Schwab’s transfer agent must receive your paper proxy card by mail no later than [], 2020. Your attendance at the Schwab special meeting alone will not revoke any proxy previously given.

 

Q:

If my shares of Schwab common stock are held in “street name,” will my broker, bank, nominee or other holder of record automatically vote my shares for me?

 

A:

No. If your shares of Schwab common stock are held in “street name,” you must instruct the broker, bank, nominee or other holder of record on how to vote your shares. Your broker, bank, nominee or other holder of record will vote your shares of Schwab common stock only if you provide instructions on how to vote by filling out the voting instruction form sent to you by your broker, bank, nominee or other holder of record with this joint proxy statement/prospectus.

 

Q:

How will my shares of Schwab common stock be represented at the Schwab special meeting, and what will happen if I return my proxy card without indicating how to vote?

 

A:

If you submit your proxy via the Internet, by telephone or by mail, the officers named on your proxy card will vote your shares of Schwab common stock in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how to vote on any particular proposal, the shares of Schwab common stock represented by your proxy will be voted in favor of that proposal.

 

Q:

What is the effect of not submitting my proxy if my shares of Schwab common stock are held in a retirement plan?

 

A:

A trustee under a retirement plan may be able to vote a participant’s unvoted shares of Schwab common stock. For example, if you are a participant in The SchwabPlan Retirement Savings and Investment Plan, the trustee, under certain circumstances, can vote your shares of Schwab common stock. Specifically, the trustee will vote shares of Schwab common stock you hold under the Employee Stock Ownership Plan (ESOP) component of The SchwabPlan Retirement Savings and Investment Plan if the trustee does not receive voting instructions from you. The trustee will vote your unvoted shares of Schwab common stock held under the ESOP component of the overall plan in the same proportion as all other plan participants vote their shares of Schwab common stock held under the ESOP component of the overall plan.

 

Q:

Where do I find the voting results of the Schwab special meeting?

 

A:

Schwab will announce preliminary voting results at the Schwab special meeting. Schwab will announce the final results on a Form 8-K following the Schwab special meeting. You may access a copy electronically on Schwab’s website at www.aboutschwab.com/investor-relations by clicking on “Financial Reports & Presentations” or through the SEC’s electronic data system at www.sec.gov. You also may obtain a copy by contacting investor.relations@schwab.com.

Voting results are tabulated and certified by Schwab’s transfer agent, Equiniti Trust Company.

 

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Q:

Who may attend the TD Ameritrade special meeting?

 

A:

You or your authorized proxy may attend the TD Ameritrade special meeting if you were a registered or beneficial owner of TD Ameritrade common stock as of the TD Ameritrade record date. You will need to obtain an admission ticket in advance to attend the TD Ameritrade special meeting. To do so, please make your request by mail to TD Ameritrade’s Investor Relations Department (at TD Ameritrade’s executive offices at 200 South 108th Avenue, Omaha, Nebraska 68154, Attention: Investor Relations), by email at jeffrey.goeser@tdameritrade.com or by phone at (402) 597-8464. TD Ameritrade’s Investor Relations Department must receive your request for an admission ticket on or before [], 2020. Seating will be limited and requests for tickets will be processed in the order in which they are received.

If you own shares of TD Ameritrade common stock in street name through an account with a broker, bank, nominee or other holder of record, then send proof of your ownership of shares of TD Ameritrade common stock as of the TD Ameritrade record date (for example, a brokerage firm account statement or a “legal proxy” from your intermediary) along with your ticket request. If you are not sure what proof to send, check with your intermediary.

For security reasons, be prepared to show a form of government-issued photo identification when presenting your ticket for admission to the TD Ameritrade special meeting. See “The TD Ameritrade Special Meeting—Attendance at the TD Ameritrade Special Meeting and Voting in Person” beginning on page 89 of this joint proxy statement/prospectus for additional information on how to attend, and procedures related to, the TD Ameritrade special meeting.

TD Ameritrade stockholders may contact TD Ameritrade’s Investor Relations Department toll-free at (800) 669-3900 to obtain directions to the location of the TD Ameritrade special meeting.

 

Q:

Who may attend the Schwab special meeting?

 

A:

Schwab stockholders at the Schwab record date, or their authorized representatives, may attend the Schwab special meeting. If you hold shares of Schwab common stock in your name at the Schwab record date, please be prepared to provide proper picture identification, such as a driver’s license or passport, to gain admission to the Schwab special meeting.

If you are a beneficial owner of shares of Schwab common stock held in “street name” by a broker, bank, nominee or other holder of record at the Schwab record date, in addition to proper identification, you will also need proof of ownership at the Schwab record date to be admitted to the Schwab special meeting. A brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of Schwab common stock held in “street name” in person at the Schwab special meeting, you will have to obtain a legal proxy in your name from the broker, bank, nominee or other holder of record who holds your shares.

Schwab stockholders may contact Schwab’s Investor Relations Department at (415) 667-7000 to obtain directions to the location of the Schwab special meeting.

 

Q:

Is my vote important?

 

A:

Yes, your vote is very important. The approval and adoption of the merger agreement by the TD Ameritrade stockholders, and the approval of the share issuance and the Schwab charter amendment by the Schwab stockholders, are conditions to the obligations of Schwab, Merger Sub and TD Ameritrade to complete the merger.

For TD Ameritrade stockholders, an abstention or failure to vote will have the same effect as a vote “AGAINST” the approval and adoption of the merger agreement. In addition, if a TD Ameritrade stockholder holds shares of TD Ameritrade common stock in “street name” through a broker, bank, nominee or other holder of record and does not give voting instructions to that broker, bank, nominee or other holder

 

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of record, that broker, bank, nominee or other holder of record will not be able to vote the shares on the approval and adoption of the merger agreement, and such failure to give those instructions will have the same effect as a vote “AGAINST” the approval and adoption of the merger agreement.

The TD Ameritrade board of directors unanimously recommends that TD Ameritrade stockholders vote “FOR” the approval and adoption of the merger agreement.

For Schwab stockholders, an abstention will have the same effect as a vote “AGAINST” the share issuance.

For Schwab stockholders, an abstention or failure to vote will have the same effect as a vote “AGAINST” the Schwab charter amendment. In addition, if a Schwab stockholder holds shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record and does not give voting instructions to that broker, bank, nominee or other holder of record, that broker, bank, nominee or other holder of record will not be able to vote the shares on the Schwab charter amendment, and such failure to give those instructions will have the same effect as a vote “AGAINST” the Schwab charter amendment.

The Schwab board of directors unanimously recommends that Schwab stockholders vote “FOR” the approval of the share issuance and “FOR” the approval of the Schwab charter amendment.

 

Q.

Can I revoke my proxy or change my voting instructions?

 

A:

Yes. You may revoke your proxy or change your vote before your proxy is voted at the applicable special meeting.

If you are a stockholder of record at the TD Ameritrade record date or the Schwab record date, as applicable, you can revoke your proxy or change your vote by:

 

   

sending a signed notice that bears a date later than the date of the proxy you want to revoke stating that you revoke your proxy:

 

   

if you are a TD Ameritrade stockholder, to TD Ameritrade’s Investor Relations Department (at TD Ameritrade’s executive offices at 200 South 108th Avenue, Omaha, Nebraska 68154, Attention: Investor Relations). TD Ameritrade’s Investor Relations Department must receive your proxy card no later than [] on [], 2020; or

 

   

if you are a Schwab stockholder, to EQ Shareowner Services, PO Box 64859, St. Paul, MN 55164. Equiniti Trust Company must receive your proxy card no later than [] on [], 2020; or

 

   

submitting a valid, later-dated proxy by mail that is received before [] on [], 2020, if you are a TD Ameritrade stockholder, or before [], 2020, if you are a Schwab stockholder, or via the Internet or by telephone before [] on [], 2020, if you are a TD Ameritrade stockholder, or before 11:59 p.m. Central Time on [], 2020, if you are a Schwab stockholder; or

 

   

attending the applicable special meeting (or, if the applicable special meeting is adjourned or postponed, attending the adjourned or postponed meeting) and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not revoke any proxy previously given.

If you hold your shares of TD Ameritrade common stock in “street name” through a broker, bank, nominee or other holder of record, you must contact your broker, bank, nominee or other holder of record to change your vote or obtain a legal proxy to vote your shares if you wish to cast your vote in person at the applicable special meeting.

 

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Q:

What happens if I sell my shares of TD Ameritrade common stock after the TD Ameritrade record date but before the TD Ameritrade special meeting?

 

A:

The TD Ameritrade record date is earlier than the date of the TD Ameritrade special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of TD Ameritrade common stock after the TD Ameritrade record date but before the date of the TD Ameritrade special meeting, you will retain your right to vote at the TD Ameritrade special meeting. However, you will not have the right to receive the merger consideration to be received by TD Ameritrade stockholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

 

Q:

What happens if I sell my shares of Schwab common stock after the Schwab record date but before the Schwab special meeting?

 

A:

The Schwab record date is earlier than the date of the Schwab special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Schwab common stock after the Schwab record date but before the date of the Schwab special meeting, you will retain your right to vote at the Schwab special meeting.

 

Q:

What do I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus, the proxy card or the voting instruction form. This can occur if you hold your shares in more than one brokerage account, if you hold shares directly as a record holder and also in “street name,” or otherwise through another holder of record, and in certain other circumstances. In addition, if you are a holder of shares of both Schwab common stock and TD Ameritrade common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. If you receive more than one set of voting materials, please vote or return each set separately in order to ensure that all of your shares are voted.

 

Q:

Is the completion of the merger subject to any conditions?

 

A:

Yes. Schwab and TD Ameritrade are not required to complete the merger unless a number of conditions are satisfied (or, to the extent permitted by applicable law, waived). These conditions include, among others, the approval and adoption of the merger agreement by TD Ameritrade stockholders (which condition may not be waived), the approval of the share issuance and the Schwab charter amendment by Schwab stockholders, the expiration or termination of any applicable waiting period, or any extension thereof, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to in this joint proxy statement/prospectus as the HSR Act and receipt of the noncontrol determinations (as defined in this joint proxy statement/prospectus). For a more complete summary of the conditions that must be satisfied (or, to the extent permitted by applicable law, waived) prior to completion of the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 156 of this joint proxy statement/prospectus.

 

Q:

When do Schwab and TD Ameritrade expect to complete the merger?

 

A:

As of the date of this joint proxy statement/prospectus, Schwab and TD Ameritrade expect to complete the merger in the second half of 2020 due to the parties’ current expectations regarding the timing of certain regulatory approvals, subject to satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to the parties’ obligations to complete the merger. However, no assurance can be given as to when, or if, the merger will be completed.

 

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Q:

Is the transaction expected to be taxable to U.S. TD Ameritrade stockholders?

 

A:

The merger has been structured to qualify as a reorganization for U.S. federal income tax purposes if certain conditions are met. Schwab and TD Ameritrade currently expect those conditions to be met and to report the merger as qualifying as a reorganization for U.S. federal income tax purposes. In addition, each of Schwab and TD Ameritrade has agreed to use its reasonable best efforts (i) to cause the merger to qualify as a reorganization for U.S. federal income tax purposes and (ii) not to, and not to permit or cause any of their respective subsidiaries or affiliates to, take or cause to be taken any action reasonably likely to cause the merger to fail to qualify as a reorganization for U.S. federal income tax purposes. However, the qualification of the merger as a reorganization depends on numerous facts and circumstances, some of which are not known as of the date of this joint proxy statement/prospectus and are outside of the parties’ control. Accordingly, there can be no assurance that the merger will qualify as a reorganization for U.S. federal income tax purposes. The receipt of an opinion from counsel on the qualification of the merger as a reorganization for U.S. federal income tax purposes is not a condition to either party’s obligation to complete the merger, and Schwab and TD Ameritrade have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger. Even if Schwab and TD Ameritrade report the merger as qualifying as a reorganization, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to the position taken by Schwab and TD Ameritrade.

If the merger qualifies as a reorganization, U.S. holders of shares of TD Ameritrade common stock will generally not be subject to U.S. federal income tax as a result of the exchange of their shares of TD Ameritrade common stock for shares of Schwab common stock (except in connection with cash received in lieu of a fractional share of Schwab common stock) in the merger. If, on the other hand, the merger did not qualify as a reorganization, the merger generally would be a taxable transaction to U.S. holders of shares of TD Ameritrade common stock, and such holders would generally recognize gain or loss in an amount equal to the difference, if any, between (i) the sum of the value of the Schwab common stock received in the merger plus the amount of any cash received instead of fractional shares of Schwab common stock and (ii) such holder’s adjusted tax basis in the shares of TD Ameritrade common stock exchanged in the merger.

You should be aware that the federal income tax consequences described above may not apply to all holders of TD Ameritrade common stock. Your tax consequences will depend on your individual situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

For a more complete discussion of the material U.S. federal income tax consequences of the merger, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 177 of this joint proxy statement/prospectus.

 

Q:

What do I need to do now?

 

A:

Carefully read and consider the information contained in and incorporated by reference into this joint proxy statement/prospectus, including its annexes. Then, please vote your shares of Schwab common stock or TD Ameritrade common stock, as applicable, which you may do by:

 

   

signing, dating, marking and returning the enclosed proxy card or voting instruction form in the accompanying postage-paid return envelope;

 

   

submitting your proxy via the Internet or by telephone by following the instructions included on your proxy card or voting instruction form; or

 

   

attending the applicable special meeting and voting by ballot in person.

If you hold shares in “street name” through a broker, bank, nominee or other holder of record, please instruct your broker, bank, nominee or other holder of record to vote your shares by following the instructions that the broker, bank, nominee or other holder of record provides to you with these materials.

 

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See “—How will my shares of TD Ameritrade common stock be represented at the TD Ameritrade special meeting, and what will happen if I return my proxy card without indicating how to vote?” beginning on page 9 of this joint proxy statement/prospectus and “—How will my shares of Schwab common stock be represented at the Schwab special meeting, and what will happen if I return my proxy card without indicating how to vote?” beginning on page 11 of this joint proxy statement/prospectus.

 

Q:

Should I send in my TD Ameritrade stock certificates now?

 

A:

No. TD Ameritrade stockholders should not send in their stock certificates at this time. After completion of the merger, Schwab’s exchange agent, Equiniti Trust Company, will send you a letter of transmittal and instructions for exchanging your shares of TD Ameritrade common stock for the merger consideration. The shares of Schwab common stock you receive in the merger will be issued in book-entry form and physical certificates will not be issued. See “The Merger Agreement—Procedures for Surrendering TD Ameritrade Stock Certificates” beginning on page 154 of this joint proxy statement/prospectus.

 

Q:

How will outstanding TD Ameritrade equity awards be treated in connection with the merger?

 

A:

Upon the completion of the merger, each outstanding option to purchase shares of TD Ameritrade common stock, which is referred to in this joint proxy statement/prospectus as a TD Ameritrade option, restricted stock unit with respect to TD Ameritrade common stock (other than those granted under the TD Ameritrade Holding Corporation 2006 Directors Incentive Plan), which is referred to in this joint proxy statement/prospectus as a TD Ameritrade RSU, and restricted stock unit award with respect to TD Ameritrade common stock that is eligible to vest based on achievement of performance goals, which is referred to in this joint proxy statement/prospectus as a TD Ameritrade PSU, will be converted into an option or restricted stock unit, as applicable, with respect to shares of Schwab common stock, after giving effect to the exchange ratio (as defined in this joint proxy statement/prospectus). In the case of TD Ameritrade options, the per share option exercise price of each TD Ameritrade option will be divided by the exchange ratio to determine the per share exercise price of each new award. Such converted options and restricted stock units will otherwise be subject to the same terms and conditions as were applicable immediately prior to completion of the merger, with the exception that each converted TD Ameritrade PSU will solely be subject to service-based vesting conditions and the number of shares of Schwab common stock subject to such converted award will be determined based on the number of shares of TD Ameritrade common stock that would have been earned by the TD Ameritrade PSU immediately prior to the completion of the merger determined based on the greater of the actual or target level of achievement of the applicable performance goals.

Upon the completion of the merger, each restricted stock unit with respect to TD Ameritrade common stock granted under the TD Ameritrade Holding Corporation 2006 Directors Incentive Plan, which is referred to in this joint proxy statement/prospectus as a TD Ameritrade director RSU, will vest, if unvested, and will be cancelled and converted into the right to receive the merger consideration as if such TD Ameritrade director RSU had been settled in shares of TD Ameritrade common stock immediately prior to the completion of the merger.

See “The Merger Agreement—Treatment of TD Ameritrade Equity Awards” beginning on page 155 of this joint proxy statement/prospectus for further information of the treatment of TD Ameritrade options, TD Ameritrade RSUs, TD Ameritrade PSUs and TD Ameritrade director RSUs as a result of the merger.

 

Q:

Are TD Ameritrade stockholders entitled to appraisal rights?

 

A:

No. TD Ameritrade stockholders do not have dissenters’ or appraisal rights with respect to the merger. See “The Merger—No Appraisal Rights” beginning on page 151 of this joint proxy statement/prospectus.

 

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Q:

Will I continue to receive dividends?

A: Under the merger agreement, each of Schwab and TD Ameritrade is permitted to continue to declare and pay regular quarterly cash dividends. Schwab and TD Ameritrade have agreed to coordinate with the other regarding the declaration and payment of dividends in respect of Schwab common stock and TD Ameritrade common stock and the record dates and payment dates relating thereto. As contemplated by the merger agreement, any holder of Schwab common stock and TD Ameritrade common stock will not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to its shares of TD Ameritrade common stock, on the one hand, and shares of Schwab common stock any holder of TD Ameritrade common stock receives pursuant to the merger, on the other. See “Comparative Per Share Market Price and Dividend Information” beginning on page 46 of this joint proxy statement/prospectus.

 

Q:

If I am a TD Ameritrade stockholder, whom should I call with questions?

 

A:

If you have any questions about the merger or the TD Ameritrade special meeting, or desire additional copies of this joint proxy statement/prospectus, proxy cards or voting instruction forms, you should contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders Call Toll-Free: (877) 456-3422

Banks and Brokers Call Collect: (212) 750-5833

or

TD Ameritrade Holding Corporation

200 South 108th Avenue

Omaha, Nebraska 68154

Attention: Investor Relations

Telephone: (402) 597-8464

 

Q:

If I am a Schwab stockholder, whom should I call with questions?

 

A:

If you have any questions about the merger or the Schwab special meeting, or desire additional copies of this joint proxy statement/prospectus, proxy cards or voting instruction forms, you should contact:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Telephone Toll Free: (800) 884-5101

Email: schw@dfking.com

or

The Charles Schwab Corporation

211 Main Street

San Francisco, California 94105

Attention: Investor Relations

Telephone: (415) 667-7000

Email: investor.relations@schwab.com

 

Q:

Where can I find more information about TD Ameritrade and Schwab?

 

A:

You can find more information about TD Ameritrade and Schwab from the various sources described under the heading “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus.

 

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SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to read carefully the entire joint proxy statement/prospectus and the other documents referred to or incorporated by reference into this joint proxy statement/prospectus in order to fully understand the merger agreement and the merger. See “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus. Each item in this summary refers to the page of this joint proxy statement/prospectus on which that subject is discussed in more detail.

The Companies (See Page 76)

The Charles Schwab Corporation

Schwab is a savings and loan holding company, headquartered in San Francisco, California. Schwab was incorporated in the State of Delaware in 1986 and engages, through its subsidiaries, in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. At December 31, 2019, Schwab had $4.04 trillion in client assets, 12.3 million active brokerage accounts, 1.7 million corporate retirement plan participants, and 1.4 million banking accounts.

Principal business subsidiaries of Schwab include the following:

 

   

Charles Schwab & Co., Inc., incorporated in 1971, a securities broker-dealer with over 360 domestic branch offices in 48 states, as well as a branch in the Commonwealth of Puerto Rico. In addition, Schwab serves clients through branch offices in the United Kingdom (U.K.) and Hong Kong through other subsidiaries of Schwab;

 

   

Charles Schwab Bank, Schwab’s principal banking entity; and

 

   

Charles Schwab Investment Management, Inc., the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds®) and Schwab’s exchange-traded funds (Schwab ETFsTM).

Schwab provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking, and support services, as well as retirement business services, to independent registered investment advisors, which are referred to in this joint proxy statement/prospectus as RIAs, independent retirement advisors, and recordkeepers.

Schwab was incorporated in the State of Delaware on November 25, 1986. The principal trading market for Schwab common stock (NYSE: SCHW) is the NYSE. The principal executive offices of Schwab are located at 211 Main Street, San Francisco, California 94105; its telephone number is (415) 667-7000; and its website is www.schwab.com.

This joint proxy statement/prospectus incorporates important business and financial information about Schwab from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a list of the documents that are incorporated by reference, see “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus.

TD Ameritrade Holding Corporation

TD Ameritrade is a leading provider of securities brokerage services and related technology-based financial services to retail clients and RIAs. TD Ameritrade provides services to individual retail investors and traders and



 

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to RIAs predominantly through the Internet, a national branch network and relationships with RIAs. TD Ameritrade uses its platform to offer brokerage services to retail investors and traders under a simple, low cost structure and brokerage custodial services to RIAs.

TD Ameritrade has been an innovator in electronic brokerage services since entering the retail securities brokerage business in 1975. TD Ameritrade believes that it was the first brokerage firm to offer the following products and services to retail clients: touch-tone trading; trading over the Internet; mobile trading; unlimited, streaming, free real-time quotes; extended trading hours; direct access to market destinations; commitment on the speed of order execution; and trading of select securities 24 hours a day, five days a week. Over the years the number of brokerage accounts, RIA relationships, average daily trading volume and total assets in client accounts have substantially increased. TD Ameritrade has also built, and continues to invest in, a proprietary trade processing platform that is both cost-efficient and highly scalable, significantly lowering its operating costs per trade. In addition, TD Ameritrade has made significant investments in building the TD Ameritrade brand.

TD Ameritrade was originally incorporated in the State of Delaware on April 1, 2002. The principal trading market for TD Ameritrade common stock (NASDAQ: AMTD) is NASDAQ. TD Ameritrade’s principal executive offices are located at 200 South 108th Avenue, Omaha, Nebraska 68154; its telephone number is (800) 669-3900; and its website is www.tdameritrade.com.

This joint proxy statement/prospectus incorporates important business and financial information about TD Ameritrade from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a list of the documents that are incorporated by reference, see “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus.

Americano Acquisition Corp.

Americano Acquisition Corp., which is referred to in this joint proxy statement/prospectus as Merger Sub, is a wholly owned subsidiary of Schwab. Merger Sub was formed solely for the purpose of completing the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the merger.

Merger Sub was incorporated in the State of Delaware on November 19, 2019. The principal executive offices of Merger Sub are located at 211 Main Street, San Francisco, California 94105, and its telephone number is (415) 667-7000.

The Merger (See Page 92)

Schwab, Merger Sub and TD Ameritrade have entered into the merger agreement. Subject to the terms and conditions of the merger agreement and in accordance with applicable law, Merger Sub will be merged with and into TD Ameritrade, with TD Ameritrade continuing as the surviving corporation. Upon completion of the merger, TD Ameritrade will be a wholly owned subsidiary of Schwab, and TD Ameritrade common stock will be delisted from NASDAQ and deregistered under the Securities Exchange Act of 1934, as amended, which is referred to in this joint proxy statement/prospectus as the Exchange Act.

A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. You should read the merger agreement carefully because it is the legal document that governs the merger. 



 

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The TD Ameritrade Special Meeting (See Page 84)

Meeting. The TD Ameritrade special meeting will be held on [], 2020, at [], located at [], at [], local time. At the TD Ameritrade special meeting, TD Ameritrade stockholders will be asked to consider and vote on the following:

 

   

to approve and adopt the merger agreement;

 

   

to approve, on a non-binding, advisory basis, the TD Ameritrade merger-related compensation proposal; and

 

   

to approve the TD Ameritrade adjournment proposal.

Record Date. The TD Ameritrade board of directors has fixed the close of business on [], 2020 as the record date for the determination of the TD Ameritrade stockholders entitled to vote at the TD Ameritrade special meeting or any adjournment or postponement of the TD Ameritrade special meeting. Only holders of record of TD Ameritrade common stock as of the close of business on the TD Ameritrade record date are entitled to receive notice of, and to vote at, the TD Ameritrade special meeting or any adjournment or postponement thereof. As of the close of business on the TD Ameritrade record date, there were [●] shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting, held by approximately [●] holders of record.

Quorum. TD Ameritrade’s by-laws provide that the holders of a majority of the voting power of all outstanding shares of capital stock of TD Ameritrade entitled to vote, present in person or represented by proxy, will constitute a quorum for the transaction of business at the TD Ameritrade special meeting. Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the TD Ameritrade special meeting. Shares of TD Ameritrade common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record, and shares of TD Ameritrade common stock with respect to which the beneficial owner otherwise fails to vote, will not be deemed present at the TD Ameritrade special meeting for the purpose of determining the presence of a quorum. Failure of a quorum to be present at the TD Ameritrade special meeting will necessitate an adjournment or postponement of the meeting and will subject TD Ameritrade to additional expense. 

Required Vote. Approval and adoption of the merger agreement requires the affirmative vote of (i) the holders of a majority of the shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting and (ii) the holders (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) of a majority of the shares of TD Ameritrade common stock (other than shares of TD Ameritrade common stock held by TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) outstanding and entitled to vote at the TD Ameritrade special meeting. Accordingly, a TD Ameritrade stockholder’s abstention from voting, the failure of a TD Ameritrade stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TD Ameritrade stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the approval and adoption of the merger agreement. TD Ameritrade cannot complete the merger unless TD Ameritrade stockholders approve and adopt the merger agreement.

To approve, on a non-binding, advisory basis, the TD Ameritrade merger-related compensation proposal, the affirmative vote of the holders of a majority of the total shares of TD Ameritrade common stock present in person or represented by proxy and voting on the matter at the TD Ameritrade special meeting, assuming a quorum is represented at the meeting, is required. Accordingly, assuming a quorum is present, a TD Ameritrade stockholder’s abstention from voting, the failure of a TD Ameritrade stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TD Ameritrade stockholder’s other failure to vote will have no effect on the outcome of any vote to approve the TD Ameritrade merger-related compensation proposal.



 

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To approve the TD Ameritrade adjournment proposal, the affirmative vote of the holders of a majority of the total shares of TD Ameritrade common stock present in person or represented by proxy and voting on the matter at the TD Ameritrade special meeting, assuming a quorum is represented at the meeting, is required. Accordingly, assuming a quorum is present, a TD Ameritrade stockholder’s abstention from voting, the failure of a TD Ameritrade stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TD Ameritrade stockholder’s other failure to vote will have no effect on the outcome of any vote to approve the TD Ameritrade adjournment proposal.

Stock Ownership of and Voting by TD Ameritrade’s Directors and Executive Officers. As of the close of business on [●], 2020, the TD Ameritrade record date, TD Ameritrade’s directors and executive officers and their affiliates beneficially owned and were entitled to vote approximately [●] shares of TD Ameritrade common stock, or approximately [●]% of the shares of TD Ameritrade common stock outstanding on that date.

It is currently expected that TD Ameritrade’s directors and executive officers will vote their shares of TD Ameritrade common stock in favor of each of the proposals to be considered and voted on at the TD Ameritrade special meeting, but none of them have entered into any agreement obligating them to do so.

The Schwab Special Meeting (See Page 78)

Meeting. The Schwab special meeting will be held on [], 2020, at [], located at [], at [], local time. At the Schwab special meeting, Schwab stockholders will be asked to consider and vote on the following:

 

   

to approve the share issuance;

 

   

to approve the Schwab charter amendment; and

 

   

to approve the Schwab adjournment proposal.

Record Date. The Schwab board of directors has fixed the close of business on [], 2020 as the record date for the determination of the Schwab stockholders entitled to vote at the Schwab special meeting or any adjournment or postponement thereof. Only Schwab stockholders of record at the Schwab record date are entitled to receive notice of, and to vote at, the Schwab special meeting or any adjournment or postponement thereof. As of the close of business on the Schwab record date, there were [●] shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting. Each holder of Schwab common stock is entitled to one vote on each proposal to be considered at the Schwab special meeting for each share of Schwab common stock owned at the Schwab record date.

Quorum. The Schwab bylaws provide that the holders of a majority in voting interest of the outstanding shares of Schwab common stock entitled to vote, present in person or by proxy, will constitute a quorum for the transaction of business at the Schwab special meeting. Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the Schwab special meeting. Shares of Schwab common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record, and shares of Schwab common stock with respect to which the beneficial owner otherwise fails to vote, will not be deemed present at the Schwab special meeting for the purpose of determining the presence of a quorum. Failure of a quorum to be present at the Schwab special meeting will necessitate an adjournment of the meeting and will subject Schwab to additional expense.



 

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Required Vote. The required votes to approve the proposals to be considered at the Schwab special meeting are as follows:

 

   

Share issuance. Approval of the share issuance under the rules of the NYSE requires the affirmative vote of a majority of the votes cast at the Schwab special meeting by holders of shares of Schwab common stock. Under the current rules and interpretive guidance of the NYSE, an abstention is considered a vote cast for purposes of this vote. Approval of the share issuance under the Schwab bylaws requires the affirmative vote of the holders of a majority of shares of Schwab common stock present at the Schwab special meeting in person or by proxy and entitled to vote at the Schwab special meeting, a quorum being present. Under either voting standard, an abstention from voting will have the same effect as a vote “AGAINST” the proposal. Also under either voting standard, assuming a quorum is present, the failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have no effect on the vote to approve the share issuance. Because the voting standard set forth in the Schwab bylaws is the same or greater than the voting standard set forth in the rules of the NYSE, the voting standard set forth in the Schwab bylaws is the applicable vote on the share issuance.

 

   

Schwab charter amendment. Approval of the Schwab charter amendment requires the affirmative vote of the holders of a majority of the shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting. Accordingly, a Schwab stockholder’s abstention from voting, the failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the Schwab charter amendment.

Schwab cannot complete the merger unless Schwab stockholders approve the share issuance and the Schwab charter amendment.

 

   

Schwab adjournment proposal. Approval of the Schwab adjournment proposal requires the affirmative vote of the holders of a majority of shares of Schwab common stock that are present in person or represented by proxy at the Schwab special meeting and entitled to vote at the Schwab special meeting, whether or not a quorum is present. Accordingly, a Schwab stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the proposal. The failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have no effect on the Schwab adjournment proposal.

Stock Ownership of and Voting by Schwab’s Directors and Executive Officers. As of the close of business on [●], 2020, the Schwab record date, Schwab’s directors and executive officers and their affiliates beneficially owned and were entitled to vote approximately [●] shares of Schwab common stock, or approximately [●]% of the shares of Schwab common stock outstanding on that date.

It is currently expected that Schwab’s directors and executive officers will vote their shares of Schwab common stock in favor of each of the proposals to be considered and voted on at the Schwab special meeting, but none of them, other than Charles R. Schwab pursuant to the significant Schwab stockholders voting agreement, have entered into any agreement obligating them to do so. 

The TD Bank Voting Agreement (See Page 182)

Concurrently with the execution of the merger agreement, TD Bank entered into the TD Bank voting agreement with Schwab. Pursuant to the TD Bank voting agreement, TD Bank has agreed to vote all of its shares



 

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of TD Ameritrade common stock (i) in favor of the approval and adoption of the merger agreement, and against any competing transaction, (ii) in favor of the TD Ameritrade adjournment proposal and (iii) in favor of any action reasonably requested by Schwab in furtherance of the merger agreement, the merger and any other transactions contemplated by the merger agreement, and against any action or agreement that would result in a material breach of any obligation or agreement of TD Ameritrade under the merger agreement or of TD Bank under the TD Bank voting agreement. The TD Bank voting agreement imposes certain restrictions on TD Bank’s right to transfer shares of TD Ameritrade common stock, as described under “The Voting Agreements—The TD Bank Voting Agreement,” beginning on page 182 of this joint proxy statement/prospectus.

The TD Bank voting agreement will terminate upon the earliest to occur of (i) the completion of the merger or (ii) the termination of the merger agreement in accordance with its terms.

As of the TD Ameritrade record date, TD Bank held in the aggregate [●] shares of TD Ameritrade common stock (representing approximately [●]% of the outstanding shares of TD Ameritrade common stock).

A copy of the TD Bank voting agreement is attached as Annex C to this joint proxy statement/prospectus.

The Significant TD Ameritrade Stockholders Voting Agreement (See Page 183)

Concurrently with the execution of the merger agreement, certain stockholders of TD Ameritrade, including J. Joe Ricketts and Marlene M. Ricketts, who are referred to in this joint proxy statement/prospectus as the significant TD Ameritrade stockholders, entered into the significant TD Ameritrade stockholders voting agreement with Schwab. Pursuant to the significant TD Ameritrade stockholders voting agreement, the significant TD Ameritrade stockholders have agreed to vote all of their shares of TD Ameritrade common stock (i) in favor of the approval and adoption of the merger agreement, and against any competing transaction, (ii) in favor of the TD Ameritrade adjournment proposal and (iii) against any action or agreement that would result in a material breach of any obligation or agreement of TD Ameritrade under the merger agreement. The significant TD Ameritrade stockholders voting agreement imposes certain restrictions on the significant TD Ameritrade stockholders’ right to transfer shares of TD Ameritrade common stock, as described under “The Voting Agreements—The Significant TD Ameritrade Stockholders Voting Agreement,” beginning on page 183 of this joint proxy statement/prospectus.

The significant TD Ameritrade stockholders voting agreement will terminate upon the earliest to occur of (i) the completion of the merger, (ii) the date and time on which the merger agreement is amended in a manner that changes the form or amount of merger consideration payable in respect of the shares subject to the significant TD Ameritrade stockholders voting agreement or is in any way material and adverse to any of the significant TD Ameritrade stockholders, (iii) the termination of the merger agreement in accordance with its terms, (iv) the date and time on which the necessary TD Ameritrade stockholder approval is obtained or (v) the TD Ameritrade board of directors changes its recommendation in favor of the approval and adoption of the merger agreement.

As of the TD Ameritrade record date, the significant TD Ameritrade stockholders held in the aggregate [●] shares of TD Ameritrade common stock (representing approximately [●]% of the outstanding shares of TD Ameritrade common stock).

A copy of the significant TD Ameritrade stockholders voting agreement is attached as Annex D to this joint proxy statement/prospectus.



 

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The Significant Schwab Stockholders Voting Agreement (See Page 184)

Concurrently with the execution of the merger agreement, Charles R. Schwab and Helen O’Neill Schwab, who are referred to in this joint proxy statement/prospectus as the significant Schwab stockholders, entered into the significant Schwab stockholders voting agreement with TD Ameritrade. Pursuant to the significant Schwab stockholders voting agreement, the significant Schwab stockholders have agreed to vote all of their shares of Schwab common stock (i) in favor of the share issuance and the Schwab charter amendment, and against any competing transaction, (ii) in favor of the Schwab adjournment proposal and (iii) in favor of any action reasonably requested by TD Ameritrade in furtherance of the merger agreement, the merger and any other transactions contemplated by the merger agreement, and against any action or agreement that would result in a material breach of any obligation or agreement of Schwab under the merger agreement or of such significant Schwab stockholder under the significant Schwab stockholders voting agreement. The significant Schwab stockholders voting agreement imposes certain restrictions on the significant Schwab stockholders’ right to transfer shares of Schwab common stock, as described under “The Voting Agreements—The Significant Schwab Stockholders Voting Agreement,” beginning on page 184 of this joint proxy statement/prospectus.

The significant Schwab stockholders voting agreement will terminate upon the earliest to occur of (i) the completion of the merger and (ii) the date of termination of the merger agreement in accordance with its terms.

As of the Schwab record date, the significant Schwab stockholders held in the aggregate [●] shares of Schwab common stock (representing approximately [●]% of the outstanding shares of Schwab common stock).

A copy of the significant Schwab stockholders voting agreement is attached as Annex E to this joint proxy statement/prospectus.

What TD Ameritrade Stockholders Will Receive in the Merger (See Page 74)

If the merger is completed, TD Ameritrade stockholders will be entitled to receive, in exchange for each share of TD Ameritrade common stock that they own immediately prior to the merger (except for shares of TD Ameritrade common stock held by TD Ameritrade as treasury stock or by Schwab (other than any fiduciary shares) which will be cancelled without payment), 1.0837 shares of Schwab common stock, and cash payable in lieu of any fractional shares as described below; provided, however, that if the shares of Schwab common stock issuable in respect of shares of TD Ameritrade common stock owned by TD Bank and its affiliates as of immediately prior to the effective time of the merger, together with any other shares of Schwab common stock then owned by TD Bank and its affiliates, would equal a number of shares of Schwab common stock exceeding 9.9% (or such lower percentage of shares of Schwab common stock as the Federal Reserve Board permits TD Bank to acquire in the merger consistent with a determination that TD Bank does not control Schwab for purposes of the Bank Holding Company Act, which is referred to in this joint proxy statement/prospectus as the BHC Act, or the Home Owners’ Loan Act, which is referred to in this joint proxy statement/prospectus as HOLA), which is referred to in this joint proxy statement/prospectus as the voting limitation percentage, of the issued and outstanding shares of Schwab common stock as of immediately following the effective time of the merger, then TD Bank will receive one share of Schwab nonvoting common stock in lieu of each such excess share of Schwab common stock.

Schwab will not issue any fractional shares in the merger. Instead, the total number of shares of Schwab common stock that each TD Ameritrade stockholder will receive in the merger will be rounded down to the nearest whole number, and each TD Ameritrade stockholder will receive cash, without interest, for any fractional share of Schwab common stock that he or she would otherwise receive in the merger. The amount of cash for fractional shares will be calculated by multiplying the fraction of a share of Schwab common stock that the TD Ameritrade stockholder would otherwise be entitled to receive in the merger by the closing market price per



 

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share of Schwab common stock on the trading day immediately prior to the date on which the merger is completed, which is referred to in this joint proxy statement/prospectus as the Schwab closing price.

Example: If you own 100 shares of TD Ameritrade common stock at the time the merger is completed, you will be entitled to receive 108 shares of Schwab common stock. In addition, you will be entitled to receive an amount of cash equal to 0.37 of a share of Schwab common stock multiplied by the Schwab closing price.

The ratio of 1.0837 shares of Schwab common stock for each share of TD Ameritrade common stock, which is referred to in this joint proxy statement/prospectus as the exchange ratio, is fixed, which means that it will not change between now and the date of the merger, regardless of whether the market price of shares of either Schwab common stock or TD Ameritrade common stock changes. Therefore, the value of the merger consideration will depend on the Schwab closing price at the time TD Ameritrade stockholders receive shares of Schwab common stock in the merger. Based on the closing price of a share of Schwab common stock on the NYSE of $44.75 on November 20, 2019, the last trading day prior to the publication of media reports regarding the merger, and of $48.20 on November 22, 2019, the last trading day prior to public announcement of the merger by Schwab and TD Ameritrade, the merger consideration represented approximately $48.50 and $52.23, respectively, in value for each share of TD Ameritrade common stock. Based on the closing price of a share of Schwab common stock on the NYSE on [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, the merger consideration represented approximately $[●] in value for each share of TD Ameritrade common stock. Because Schwab will issue a fixed number of Schwab common shares in exchange for each share of TD Ameritrade common stock, the value of the merger consideration that TD Ameritrade stockholders will receive in the merger will depend on the market price of Schwab common stock at the time the merger is completed. The market price of Schwab common stock when TD Ameritrade stockholders receive those shares after the merger is completed could be greater than, less than or the same as the market price of shares of Schwab common stock on the date of this joint proxy statement/prospectus or at the time of the TD Ameritrade special meeting.

No Dissenters’ or Appraisal Rights (See Page 151)

Neither Schwab stockholders nor TD Ameritrade stockholders have dissenters’ or appraisal rights with respect to the merger.

Treatment of TD Ameritrade Equity Awards (See Page 155)

Upon the completion of the merger, each outstanding TD Ameritrade option, TD Ameritrade RSU and TD Ameritrade PSU will be converted into an option or restricted stock unit, as applicable, with respect to shares of Schwab common stock, after giving effect to the exchange ratio. In the case of TD Ameritrade options, the per share option exercise price of each TD Ameritrade option will be divided by the exchange ratio to determine the per share exercise price of each new award. Such converted options and restricted stock units will otherwise be subject to the same terms and conditions as were applicable immediately prior to completion of the merger, with the exception that each converted TD Ameritrade PSU will solely be subject to service-based vesting conditions and the number of shares of Schwab common stock subject to such converted award will be determined based on the number of shares of TD Ameritrade common stock that would have been earned by the TD Ameritrade PSU immediately prior to the completion of the merger determined based on the greater of the actual or target level of achievement of the applicable performance goals.

Upon the completion of the merger, each TD Ameritrade director RSU will vest, if unvested, and will be cancelled and converted into the right to receive the merger consideration as if such TD Ameritrade director RSU had been settled in shares of TD Ameritrade common stock immediately prior to the completion of the merger.



 

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Recommendation of the Strategic Development Committee and the TD Ameritrade Board of Directors (See Page 107)

The strategic development committee, acting with the advice of its own legal and financial advisors, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, TD Ameritrade and TD Ameritrade stockholders other than TD Bank and its affiliates, and unanimously resolved to recommend to the TD Ameritrade board of directors that it approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger.

The TD Ameritrade board of directors, acting upon the unanimous recommendation of the strategic development committee, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, TD Ameritrade and TD Ameritrade stockholders, and unanimously recommends that TD Ameritrade stockholders vote “FOR” the approval and adoption of the merger agreement. See “TD Ameritrade Proposal I: Approval and Adoption of the Merger Agreement” and “The Merger—TD Ameritrade’s Reasons for the Merger; Recommendation of the Strategic Development Committee and the TD Ameritrade Board of Directors” beginning on pages [●] and [●], respectively, of this joint proxy statement/prospectus.

The TD Ameritrade board of directors unanimously recommends that TD Ameritrade stockholders vote “FOR” the TD Ameritrade merger-related compensation proposal and “FOR” the TD Ameritrade adjournment proposal. See “TD Ameritrade Proposal II: Advisory Vote on TD Ameritrade Merger-Related Compensation” and “TD Ameritrade Proposal III: Approval of the TD Ameritrade Adjournment Proposal” beginning on pages [●] and [●], respectively, of this joint proxy statement/prospectus.

Recommendation of the Schwab Board of Directors (See Page 114)

The Schwab board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the share issuance and the Schwab charter amendment, are advisable and fair to, and in the best interests of, Schwab and the Schwab stockholders, and unanimously recommends that Schwab stockholders vote “FOR” the approval of the share issuance and “FOR” the approval of the Schwab charter amendment. See “Schwab Proposal I: Approval of the Share Issuance” and “Schwab Proposal II: Approval of the Schwab Charter Amendment” beginning on pages [●] and [●], respectively, of this joint proxy statement/prospectus.

The Schwab board of directors unanimously recommends that Schwab stockholders vote “FOR” the Schwab adjournment proposal. See “Schwab Proposal III: Approval of the Schwab Adjournment Proposal” beginning on page 205 of this joint proxy statement/prospectus.

Opinions of the Strategic Development Committee’s Financial Advisors (See Page 118)

Opinion of PJT Partners, LP

PJT Partners LP, which is referred to in this joint proxy statement/prospectus as PJT Partners, was retained by the strategic development committee to act as its financial advisor in connection with the merger and, upon the strategic development committee’s request, to render its fairness opinion to the strategic development committee in connection therewith. At a meeting of the strategic development committee on November 20, 2019, PJT Partners rendered its oral opinion, subsequently confirmed in its written opinion dated November 20, 2019, to the strategic development committee to the effect that, as of such date and based upon and subject to, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by PJT Partners in connection with the opinion (which are stated in its written opinion),



 

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the exchange ratio in connection with the merger was fair to the holders of shares (other than the Excluded Shares (as defined in the merger agreement)) of TD Ameritrade common stock (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) from a financial point of view.

The full text of PJT Partners’ written opinion delivered to the strategic development committee, dated November 20, 2019, is attached as Annex J to this joint proxy statement/prospectus and incorporated herein by reference. PJT Partners’ written opinion has been provided by PJT Partners at the request of the strategic development committee and is subject to, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by PJT Partners in connection with the opinion (which are stated therein). You are encouraged to read PJT Partners’ written opinion carefully and in its entirety. PJT Partners provided its opinion to the strategic development committee, in its capacity as such, in connection with and for purposes of its evaluation of the merger only and PJT Partners’ opinion does not constitute a recommendation as to any action the strategic development committee or the TD Ameritrade board of directors should take with respect to the merger or how any TD Ameritrade stockholder should vote or act with respect to the merger or any other matter. The summary of the PJT Partners opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of PJT Partners’ written opinion.

For a summary of PJT Partners’ opinion and the methodology that PJT Partners used to render its opinion, see “The Merger—Opinions of the Strategic Development Committee’s Financial Advisors” beginning on page 118 of this joint proxy statement/prospectus.

Opinion of Piper Sandler & Co.

Piper Sandler & Co., which is referred to in this joint proxy statement/prospectus as Piper Sandler, was retained by the strategic development committee to act as its financial advisor in connection with the merger and, upon the strategic development committee’s request, to render a fairness opinion to the strategic development committee in connection therewith. At a meeting of the strategic development committee on November 20, 2019, Piper Sandler delivered its oral opinion, subsequently confirmed in its written opinion dated November 20, 2019, to the strategic development committee to the effect that, as of such date and based upon and subject to the conditions, limitations, qualifications and assumptions set forth therein, the exchange ratio in connection with the merger was fair, from a financial point of view, to the holders of shares (other than the Excluded Shares (as defined in the merger agreement)) of TD Ameritrade common stock (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates).

The full text of Piper Sandler’s written opinion, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion of Piper Sandler, is attached as Annex K to this joint proxy statement/prospectus and incorporated herein by reference. TD Ameritrade stockholders are urged to read Piper Sandler’s written opinion carefully and in its entirety. Piper Sandler’s opinion is limited solely to the fairness, from a financial point of view, to the holders of shares (other than the Excluded Shares (as defined in the merger agreement)) of TD Ameritrade common stock (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) of the exchange ratio in connection with the merger and does not address TD Ameritrade’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available to TD Ameritrade. Piper Sandler’s opinion does not constitute a recommendation to any TD Ameritrade stockholder as to how such stockholder should vote or act with respect to any matter relating to the merger or otherwise.

For a summary of Piper Sandler’s opinion and the methodology that Piper Sandler used to render its opinion, see “The Merger—Opinions of the Strategic Development Committee’s Financial Advisors” beginning on page 118 of this joint proxy statement/prospectus.



 

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Opinion of Schwab’s Financial Advisor (See Page 132)

Opinion of Credit Suisse Securities (USA) LLC

On November 20, 2019, Credit Suisse Securities (USA) LLC, which is referred to in this joint proxy statement/prospectus as Credit Suisse, rendered its oral opinion to the Schwab board of directors (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated as of the same date) to the effect that, as of November 20, 2019, and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in connection with the preparation of its opinion, the exchange ratio set forth in the merger pursuant to the merger agreement was fair, from a financial point of view, to Schwab.

Credit Suisse’s opinion was directed to the Schwab board of directors, and only addressed the fairness, from a financial point of view, to Schwab of the exchange ratio set forth in the merger pursuant to the merger agreement and did not address any other aspect or implication of the merger. The summary of Credit Suisse’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex L to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in connection with the preparation of its opinion. However, neither Credit Suisse’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to any security holder as to how such holder should vote or act with respect to any matter relating to the merger.

Ownership of Shares of Schwab Common Stock After the Merger (See Page 92)

Based on the number of shares of TD Ameritrade common stock and TD Ameritrade options and restricted stock units outstanding as of the Schwab record date, Schwab expects to issue approximately [●] Schwab common shares to TD Ameritrade stockholders pursuant to the merger and reserve for issuance approximately [●] additional Schwab common shares in connection with the conversion, exercise or settlement of outstanding TD Ameritrade options and restricted stock units and future equity compensation awards. The actual number of Schwab common shares to be issued and reserved for issuance pursuant to the merger will be determined at completion of the merger based on the exchange ratio and the number of shares of TD Ameritrade common stock and TD Ameritrade options and restricted stock units outstanding at that time. Based on the number of shares of TD Ameritrade common stock outstanding as of [], 2020, and the number of shares of Schwab common stock outstanding as of [], 2020, it is expected that, immediately after completion of the merger, former TD Ameritrade stockholders will own approximately [●]% of the outstanding Schwab common shares (including Schwab common stock and Schwab nonvoting common stock).

Interests of Schwab’s Directors and Executive Officers in the Merger (See Page 191)

In considering the recommendation of the Schwab board of directors that Schwab stockholders vote to approve the share issuance and the Schwab charter amendment, Schwab stockholders should be aware that the directors and executive officers of Schwab may have interests in the merger that are different from, or in addition to, the interests of Schwab stockholders generally. The Schwab board of directors was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement and the merger, in adopting the merger agreement and in making its recommendation that Schwab stockholders vote to approve the share issuance, the Schwab charter amendment and the Schwab adjournment proposal.

For more information, see “Interests of Certain Persons in the Merger—Interests of Schwab’s Directors and Executive Officers in the Merger” beginning on page 191 of this joint proxy statement/prospectus.



 

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Interests of TD Ameritrade’s Directors and Executive Officers in the Merger (See Page 191)

In considering the recommendation of the TD Ameritrade board of directors to vote for the approval and adoption of the merger agreement, TD Ameritrade stockholders should be aware that the directors and executive officers of TD Ameritrade may have interests in the merger that are different from, or in addition to, the interests of TD Ameritrade stockholders generally. The strategic development committee was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement and in making its recommendation to the TD Ameritrade board of directors that it approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger. The TD Ameritrade board of directors was also aware of these interests and considered them, among other matters, in evaluating the merger agreement and approving the merger, and in making its recommendation that TD Ameritrade stockholders vote to approve and adopt the merger agreement.

For more information, see “Interests of Certain Persons in the Merger—Interests of TD Ameritrade’s Directors and Executive Officers in the Merger” beginning on page 191 of this joint proxy statement/prospectus.

Listing of Shares of Schwab Common Stock and Delisting and Deregistration of TD Ameritrade Common Stock (See Page 151)

Application will be made to have the shares of Schwab common stock to be issued in the merger approved for listing on the NYSE, where shares of Schwab common stock are currently traded. If the merger is completed, shares of TD Ameritrade common stock will no longer be listed on NASDAQ and will be deregistered under the Exchange Act.

Completion of the Merger is Subject to Certain Conditions (See Page 156)

As more fully described in this joint proxy statement/prospectus and in the merger agreement, the obligation of each of Schwab, TD Ameritrade and Merger Sub to complete the merger is subject to the satisfaction (or, to the extent permitted by applicable law, waiver (provided that the condition in the first bullet below may not be waived)) of a number of conditions, including the following:

 

   

the affirmative vote of (i) the holders of a majority of the shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting approving and adopting the merger agreement and (ii) the holders (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) of a majority of the shares of TD Ameritrade common stock (other than shares of TD Ameritrade common stock held by TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) outstanding and entitled to vote at the TD Ameritrade special meeting approving and adopting the merger agreement;

 

   

the affirmative vote of (i) the holders of a majority of shares of Schwab common stock present in person or by proxy at the Schwab special meeting approving the share issuance (which meets or exceeds the minimum requirement under the rules of the NYSE of a majority of the votes cast by holders of shares of Schwab common stock) and (ii) the holders of a majority of shares of Schwab common stock outstanding and entitled to vote approving the Schwab charter amendment;

 

   

absence of (x) any order, injunction or decree of any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the completion of the merger or any of the other transactions contemplated by the merger agreement and (y) any statute, rule or regulation enacted, entered, promulgated or enforced by any governmental authority or otherwise in effect which prohibits or makes illegal the completion of the merger or any of the other transactions contemplated by the merger agreement;



 

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effectiveness of the registration statement for the shares of Schwab common stock being issued in the merger (of which this joint proxy statement/prospectus forms a part) and the absence of any stop order suspending that effectiveness or any proceedings for that purpose pending before the SEC;

 

   

approval for the listing on the NYSE of the shares of Schwab common stock to be issued in the merger, subject only to official notice of issuance;

 

   

accuracy of the representations and warranties made in the merger agreement by, in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab, in each case, as of the date of the merger agreement and as of the date of completion of the merger, subject to certain materiality thresholds;

 

   

performance in all material respects by, in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab and Merger Sub, of the obligations required to be performed by it at or prior to the effective time of the merger;

 

   

the absence since the date of the merger agreement of a material adverse effect on, in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab (see “The Merger Agreement—Definition of ‘Material Adverse Effect’” beginning on page 159 of this joint proxy statement/prospectus for the definition of material adverse effect);

 

   

receipt of a certificate from an executive officer of, in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab, as to the satisfaction of the conditions described in the preceding three bullets;

 

   

both (i) the expiration or termination of any applicable waiting period under the HSR Act, or any extension thereof and (ii) certain governmental authorizations having been made or obtained, as applicable, and being in full force and effect (in the case of Schwab and Merger Sub’s obligations to complete the merger, without the imposition of a burdensome condition (see “The Merger Agreement—Reasonable Best Efforts Covenant” beginning on page 167 of this joint proxy statement/prospectus for the definition of burdensome condition)); and

 

   

receipt of a determination from the Federal Reserve Board in form and substance reasonably satisfactory to Schwab or, as determined by Schwab in its sole discretion, other acceptable confirmation, that the completion of the merger will not result in Schwab either (i) being deemed to be “controlled” by TD Bank (as that term is interpreted by the Federal Reserve Board under the BHC Act or HOLA) or (ii) being deemed to be in “control” of any of TD Bank, National Association, TD Bank USA, National Association, and any other insured depository institution that may be controlled by TD Bank for purposes of the BHC Act and to which TD Bank may cause funds to be swept under the insured deposit account agreement (as defined in this joint proxy statement/prospectus) or any amendment thereto, which are collectively referred to in this joint proxy statement/prospectus as the TD subsidiary banks (as that term is interpreted by the Federal Reserve Board under the BHC Act or HOLA) (the determinations described in this bullet are collectively referred to in this joint proxy statement/prospectus as the noncontrol determinations and described in more detail under “The Merger—Regulatory Approvals Required for the Merger,” beginning on page 147 of this joint proxy statement/prospectus).

Schwab and TD Ameritrade cannot be certain when, or if, the conditions to the merger will be satisfied (or, to the extent permitted by law, waived), or that the merger will be completed.



 

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The Merger May Not Be Completed Without All Required Regulatory Approvals (See Page 147)

Completion of the merger is conditioned upon the receipt of certain governmental clearances or approvals, including, but not limited to, the expiration or termination of any applicable waiting period, or any extension thereof, under the HSR Act and certain other governmental consents and approvals from federal regulators.

Under the HSR Act, certain transactions, including the merger, may not be completed unless certain waiting period requirements have expired or been terminated. The HSR Act provides that each party must file a pre-merger notification, which are referred to in this joint proxy statement/prospectus as the HSR notifications, with the Federal Trade Commission, which is referred to in this joint proxy statement/prospectus as the FTC, and the Antitrust Division of the Department of Justice, which is referred to in this joint proxy statement/prospectus as the DOJ. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-day waiting period following the parties’ filings of their respective HSR notifications or the termination of that waiting period. If the DOJ or FTC issues a Request for Additional Information and Documentary Material, which is referred to in this joint proxy statement/prospectus as a second request, prior to the expiration of this initial 30-day waiting period, the transaction cannot close until the parties observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the second request, unless such second waiting period is terminated earlier. The parties’ HSR notifications were filed with the FTC and the DOJ on December 30, 2019. On January 29, 2020, the parties received a second request from the DOJ with respect to the merger. Accordingly, the HSR waiting period will expire 30 days after Schwab and TD Ameritrade each certify their substantial compliance with the second request, unless earlier terminated by the DOJ.

Completion of the merger is conditioned on receipt of the noncontrol determinations, and is further conditioned on, among other things, (i) submission by TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. of an application pursuant to FINRA Rule 1017 seeking FINRA’s approval of the change of ownership or control of each of TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. and FINRA’s approval thereof, (ii) submission by TD Ameritrade Clearing, Inc. to the Depository Trust & Clearing Corporation, which is referred to in this joint proxy statement/prospectus as the DTCC, on behalf of each of the Depository Trust Company, which is referred to in this joint proxy statement/prospectus as the DTC, and the National Securities Clearing Corporation, which is referred to in this joint proxy statement/prospectus as the NSCC, of written notification regarding the change of ownership and control of TD Ameritrade Clearing, Inc. contemplated by the merger agreement and the transactions thereunder consistent with the requirements of the rules of each of DTC and NSCC, (iii) receipt of consent from the Securities and Futures Commission of Hong Kong, which is referred to in this joint proxy statement/prospectus as the SFC, for Schwab to become the substantial shareholder, as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), which is referred to in this joint proxy statement/prospectus as the SFO, of TD Ameritrade Holding Corporation Hong Kong Limited, a subsidiary of TD Ameritrade, as contemplated under the merger agreement, (iv) receipt by Schwab and Merger Sub of all required consents from the Monetary Authority of Singapore, (v) submission by TD Ameritrade Futures & Forex LLC of a notification to the National Futures Association regarding the change of ownership and control of TD Ameritrade Futures & Forex LLC and (vi) at least 30 days prior to the completion of the merger, submission by TD Ameritrade, Inc., TD Ameritrade Clearing, Inc. and TD Ameritrade Futures & Forex LLC of written notification regarding the change of ownership and control of each entity to any self-regulatory organization of which it is a member and to each state or other U.S. jurisdiction in which it is registered to act as a broker-dealer.

In furtherance of the foregoing, Schwab and TD Ameritrade agreed in the merger agreement (i) that Schwab and TD Ameritrade will make as promptly as practicable, an appropriate filing of a Notification and Report Form pursuant to the HSR Act and (ii) that TD Ameritrade will submit the required notifications to DTCC at least 90 days prior to the completion of the merger, or DTCC shall have confirmed to TD Ameritrade Clearing, Inc. in writing that the transactions contemplated by the merger agreement may be effected notwithstanding DTCC having less than 90 days’ prior notice. Schwab and TD Ameritrade have also agreed not to complete the merger



 

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unless TD Bank receives the prior approval of the Federal Reserve Board pursuant to section 4 of the BHC Act, which is required in order for TD Bank to receive the merger consideration since that would represent TD Bank acquiring 5% or more of a class of voting shares of Schwab. TD Bank submitted its notice to the Federal Reserve Board on December 23, 2019 and notice of TD Bank’s filing was published on January 2, 2020.

The process for obtaining the requisite regulatory approvals for the merger is ongoing. The parties expect to remain in regular contact with DOJ officials to assist their review of the parties’ submissions to the agency and answer questions and provide clarification regarding the merger.

Schwab and TD Ameritrade have agreed in the merger agreement to use their respective reasonable best efforts, subject to certain limitations, to make certain governmental filings or obtain the required governmental authorizations, as the case may be. However, Schwab’s obligation to use reasonable best efforts to obtain regulatory approvals required to complete the merger does not require Schwab to:

 

   

propose, negotiate, commit to or effect, by consent decree, hold separate orders or otherwise, the sale, divesture, disposition, or license of any assets, properties, products, rights, services or businesses of Schwab, TD Ameritrade or any of their respective subsidiaries or any of Schwab’s affiliates, or any interest therein, or agree to any other structural or conduct remedy, if such action would reasonably be expected to have a material adverse effect on Schwab, TD Ameritrade and their respective subsidiaries, taken as a whole, in each case measured on a scale relative to the size of TD Ameritrade and its subsidiaries, taken as a whole;

 

   

otherwise take or commit to take any actions that would limit Schwab’s, TD Ameritrade’s or any of their respective subsidiaries’ or any of Schwab’s affiliates’ freedom of action with respect to, or its or their ability to retain any of their respective assets, properties, products, rights, services or businesses, or any interest or interests therein, if such action would reasonably be expected to have a material adverse effect on Schwab, TD Ameritrade and their respective subsidiaries, taken as a whole, in each case measured on a scale relative to the size of TD Ameritrade and its subsidiaries, taken as a whole;

 

   

take any action that would result in Schwab being deemed to be “controlled” by TD Bank (as that term is interpreted by the Federal Reserve Board under the BHC Act or HOLA) or being deemed to be “in control” of any of the TD subsidiary banks (as that term is interpreted under the BHC Act or HOLA), which are collectively referred to in this joint proxy statement/prospectus as a control event;

 

   

agree to any modification of the insured deposit account agreement, other than any modifications that would solely reduce the amount of deposits swept to the TD subsidiary banks thereunder; or

 

   

commence any litigation against, or defend any litigation commenced by, any governmental authority.

These requirements are described in more detail under “The Merger Agreement—Reasonable Best Efforts Covenant” beginning on page 167 of this joint proxy statement/prospectus.

Subject to certain exceptions, Schwab and TD Ameritrade have also agreed not to, and to cause their respective subsidiaries and affiliates not to, take any action that would reasonably be expected to have the effect of materially delaying, impairing or impeding the receipt of any regulatory approvals required in connection with the transactions contemplated by the merger agreement or the completion of the merger. The regulatory approvals required for completion of the merger are further described in “The Merger—Regulatory Approvals Required for the Merger” beginning on page 147 of this joint proxy statement/prospectus.

No Solicitation (See Page 164)

As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the exceptions described below, each of Schwab and TD Ameritrade has agreed not to, and to cause its



 

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subsidiaries and its and its subsidiaries’ officers, directors, employees, investment bankers, attorneys, accountants, consultants and other agents, advisors and representatives, which are collectively referred to in this joint proxy statement/prospectus as representatives, not to, directly or indirectly, among other things: (i) solicit, initiate or take any action to knowingly facilitate or knowingly encourage the submission of any acquisition proposal (as defined in this joint proxy statement/prospectus), (ii) enter into or participate in any discussions or negotiations regarding any such proposal, (iii) furnish any nonpublic information relating to that party or any of its subsidiaries to any third party that is seeking to make, or has made, an acquisition proposal, (iv) except as described below, (x) fail to make, or withdraw or qualify, amend or modify in a manner adverse to the other party the recommendation of that party’s board of directors that such party’s stockholders vote in favor of the approval and adoption of the merger agreement or such party’s stockholders vote in favor of the approval of the share issuance and the Schwab charter amendment, as applicable, (y) fail to include in this joint proxy statement/prospectus the recommendation of that party’s board of directors that such party’s stockholders vote in favor of the approval and adoption of the merger agreement or such party’s stockholders vote in favor of the approval of the share issuance and the Schwab charter amendment, as applicable or (z) recommend, adopt or approve an acquisition proposal for such party, (v) take any action to make any Delaware anti-takeover laws inapplicable to any third party or acquisition proposal or (vi) fail to enforce or grant any waiver or release under any standstill or similar agreement.

Notwithstanding the foregoing, if at any time prior to the approval and adoption of the merger agreement by TD Ameritrade stockholders, in the case of TD Ameritrade, or at any time prior to the approval of the share issuance and the Schwab charter amendment by Schwab stockholders, in the case of Schwab, TD Ameritrade or Schwab, as applicable, receives a written acquisition proposal made after the date of the merger agreement which has not resulted from a violation of the solicitation restrictions described in the first paragraph of this section (under “—No Solicitation”), the board of directors of that party is permitted to, directly or indirectly through its representatives, and subject to certain exceptions and qualifications described in the merger agreement:

 

   

(i) engage in negotiations or discussions with any third party that, subject to Schwab’s or TD Ameritrade’s compliance with the solicitation restrictions described in the first paragraph of this section (under “—No Solicitation”), has made, after the date of the merger agreement, a superior proposal (as defined in this joint proxy statement/prospectus) or an unsolicited acquisition proposal that the Schwab board of directors or the TD Ameritrade board of directors, as applicable, determines is reasonably likely to lead to a superior proposal, (ii) furnish to such third party and its representatives nonpublic information relating to Schwab or TD Ameritrade, as applicable, or any of its subsidiaries pursuant to a confidentiality agreement between Schwab or TD Ameritrade, as applicable, and such third party with terms no less favorable to Schwab or TD Ameritrade than in the confidentiality agreement between Schwab and TD Ameritrade, so long as all such nonpublic information (to the extent not previously provided or made available to the other party) is provided or made available to the other party substantially concurrently with the time it is provided or made available to such third party and (iii) following receipt of a superior proposal after the date of the merger agreement, make (in the case of TD Ameritrade, at the recommendation of the strategic development committee) an adverse recommendation change (as defined in this joint proxy statement/prospectus); and

 

   

make (in the case of TD Ameritrade, at the recommendation of the strategic development committee) an adverse recommendation change involving or relating to an intervening event (as defined in this joint proxy statement/prospectus).

Schwab or TD Ameritrade, as applicable, is only permitted to take the actions described in the two bullets above if that party’s board of directors determines in good faith, after consultation with that party’s outside legal counsel and financial advisor, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law. In addition, before taking any of the actions described above, Schwab or TD Ameritrade, as applicable, has to notify the other party that it intends to take that action and



 

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continue to advise the other party on a current basis of the status and terms of any discussions and negotiations with any third party in connection with an acquisition proposal. Further, the Schwab board of directors or the TD Ameritrade board of directors, as applicable, is not permitted to make an adverse recommendation change in response to an acquisition proposal unless (i) Schwab or TD Ameritrade, as applicable, promptly notifies the other party, in writing at least five business days before taking that action, that it intends to take that action, attaching the most current version of any proposed agreement (or a detailed summary of all material terms and the identity of the offeror), (ii) if requested by the other party, Schwab or TD Ameritrade, as applicable, negotiates in good faith with the other party during such five-business-day period regarding any proposal to amend the terms of the merger agreement, and (iii) after such five-business-day period, the Schwab board of directors or the TD Ameritrade board of directors, as applicable, determines in good faith, taking into account any proposal by the other party to amend the terms of the merger agreement, that such acquisition proposal continues to constitute a superior proposal.

The Schwab board of directors or the TD Ameritrade board of directors, as applicable, is not permitted to make an adverse recommendation change involving or related to an intervening event unless (i) Schwab or TD Ameritrade, as applicable, has provided the other party at least five business days prior written notice of its intention to make an adverse recommendation change with respect to such intervening event, attaching a reasonably detailed explanation of the facts underlying the determination by Schwab’s or TD Ameritrade’s, as applicable, board of directors that an intervening event has occurred and its need to make an adverse recommendation change in light of the intervening event and (ii) Schwab or TD Ameritrade, as applicable, does not make, within such five-business-day period, an offer that Schwab’s or TD Ameritrade’s, as applicable, board of directors determines would obviate the need for an adverse recommendation change in light of the intervening event.

During any five-business-day period prior to effecting an adverse recommendation change in response to an acquisition proposal or an intervening event, Schwab or TD Ameritrade, as applicable, and its representatives must negotiate in good faith with the other party and its representatives regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by Schwab or TD Ameritrade, as applicable.

Termination of the Merger Agreement (See Page 172)

The merger agreement may be terminated at any time before completion of the merger, whether before or after TD Ameritrade stockholders have approved and adopted the merger agreement or Schwab stockholders have approved the share issuance and the Schwab charter amendment, in any of the following ways:

 

   

by mutual written consent of Schwab and TD Ameritrade;

 

   

by either Schwab or TD Ameritrade, if:

 

   

the merger has not been completed on or before November 24, 2020, which is referred to in this joint proxy statement/prospectus as the initial end date, unless all conditions to completion of the merger have been satisfied (or in the case of conditions that by their terms are to be satisfied at completion of the merger, are capable of being satisfied on that date) or waived on the initial end date other than certain conditions relating to regulatory approvals and either Schwab or TD Ameritrade notifies the other party in writing on or before the initial end date of its election to extend the initial end date to May 24, 2021, which is referred to in this joint proxy statement/prospectus as the extended end date, in which case the merger agreement may be terminated by either Schwab or TD Ameritrade if the merger has not been completed on or before the extended end date; however, the right to terminate the merger agreement at the initial end date or the extended end date, as applicable, or to extend the initial end date will not be available to any party whose breach of any provision of the merger agreement results in the failure of the merger to be completed by such time;



 

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there is in effect any applicable law, order or injunction that makes completion of the merger illegal or otherwise enjoins, prevents or prohibits Schwab or TD Ameritrade from consummating the merger and, in either such case, such applicable law, order or injunction has become final and non-appealable;

 

   

TD Ameritrade stockholders fail to approve and adopt the merger agreement upon a vote taken on a proposal to approve and adopt the merger agreement at a TD Ameritrade stockholders’ meeting called for that purpose;

 

   

Schwab stockholders fail to approve the share issuance and the Schwab charter amendment upon a vote taken on separate proposals to approve the share issuance and the Schwab charter amendment at a Schwab stockholders’ meeting called for that purpose; or

 

   

there has been a breach by the other party of any representation or warranty or failure to perform any covenant or agreement that would result in the failure of the other party to satisfy the applicable condition to the closing related to accuracy of representations and warranties or performance of covenants, and such breach has not been cured within 45 days of notice thereof or is incapable of being cured, but only so long as the party seeking to terminate pursuant to this bullet is not then in breach of its representations, warranties, covenants or agreements contained in the merger agreement, which breach would cause the applicable condition to closing not to be satisfied; or

 

   

by Schwab, if:

 

   

any required regulatory consent (including with respect to the expiration or termination of any applicable waiting period, or any extension thereof, under the HSR Act and the noncontrol determinations by the Federal Reserve Board) is denied and such denial becomes final and non-appealable (or the applicable governmental authority decides on a final basis not to grant such consent without the imposition of a burdensome condition); or

 

   

prior to the TD Ameritrade stockholders’ approval and adoption of the merger agreement (i) the TD Ameritrade board of directors makes an adverse recommendation change or (ii) there has been a material breach by TD Ameritrade of its obligations described under “The Merger Agreement—Obligations to Call Stockholders’ Meetings” and “The Merger Agreement—No Solicitation” beginning on pages 163 and 164, respectively, of this joint proxy statement/prospectus, other than in the case where (w) such breach is a result of an isolated action by a representative of TD Ameritrade (other than one of its directors or officers), (x) such breach was not caused by, or within the knowledge of, TD Ameritrade, (y) TD Ameritrade takes appropriate actions to remedy such breach upon discovery thereof and (z) Schwab is not significantly harmed as a result thereof; or

 

   

by TD Ameritrade, if:

 

   

any required regulatory consent (including with respect to the expiration or termination of any applicable waiting period, or any extension thereof, under the HSR Act) is denied and such denial becomes final and non-appealable (or the applicable governmental authority decides on a final basis not to grant such consent); or

 

   

prior to the Schwab stockholders’ approval of the share issuance and the Schwab charter amendment (i) the Schwab board of directors makes an adverse recommendation change or (ii) there has been a material breach by Schwab of any of its obligations described under “The Merger Agreement—Obligations to Call Stockholders’ Meetings” and “The Merger Agreement—No Solicitation” beginning on pages 163 and 164, respectively, of this joint proxy statement/prospectus, other than in the case where (w) such breach is a result of an isolated action by a



 

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representative of Schwab (other than one of its directors or officers), (x) such breach was not caused by, or within the knowledge of, Schwab, (y) Schwab takes appropriate actions to remedy such breach upon discovery thereof and (z) TD Ameritrade is not significantly harmed as a result thereof.

If the merger agreement is validly terminated, the merger agreement will become void and of no effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of any party) to the other parties, except that certain designated provisions will survive termination. However, none of the parties to the merger agreement will be relieved or released from any liabilities or damages resulting from the fraud or willful breach by any party of any provision under the merger agreement.

In the event of a termination of the merger agreement under certain circumstances, Schwab or TD Ameritrade may be required to pay a termination fee of $950 million to the other. TD Ameritrade would be required to pay to Schwab a termination fee of $950 million if the merger agreement is terminated (x) by Schwab prior to receipt of TD Ameritrade stockholder approval as a result of a change in the recommendation of the TD Ameritrade board of directors to the TD Ameritrade stockholders to approve and adopt the merger agreement, (y) by Schwab due to TD Ameritrade’s breach in any material respect of the provisions of the merger agreement relating to non-solicitation of alternative transactions or convening the TD Ameritrade special meeting as described above or (z) by Schwab or TD Ameritrade if the necessary TD Ameritrade stockholder approval is not obtained and, at the time of termination, the merger agreement was terminable under clause (x) or (y) above. In addition, TD Ameritrade would be required to pay to Schwab a termination fee of $950 million if (w) the required vote of TD Ameritrade stockholders is not obtained at the TD Ameritrade special meeting, (x) prior to such vote, an alternative acquisition of TD Ameritrade was publicly disclosed or announced or made known to the TD Ameritrade management or board of directors by a third party, or any third party had publicly announced an intention to make a proposal for an alternative acquisition of TD Ameritrade and not timely withdrawn such proposal, (y) the merger agreement is terminated by either party for failure to obtain the required vote of TD Ameritrade stockholders and (z) within twelve months after such termination, TD Ameritrade enters into a definitive agreement providing for, or completes, an alternative transaction with a third party. Furthermore, TD Ameritrade would be required to pay to Schwab a termination fee of $950 million if (x) Schwab or TD Ameritrade terminates the merger agreement on the basis the merger has not been completed on or prior to the initial end date or the extended end date, as applicable, or Schwab terminates the merger agreement on the basis of an uncured or incurable breach of representation or warranty, or failure to perform a required covenant, by TD Ameritrade (and, in any such case under this clause (x), the required vote of TD Ameritrade stockholders has not been obtained at the TD Ameritrade special meeting at the time of termination), (y) at or prior to the time of termination, an acquisition of TD Ameritrade was publicly proposed or announced or made known to the TD Ameritrade management or board of directors by a third party, or any third party had publicly announced an intention to make a proposal for an alternative acquisition of TD Ameritrade and not timely withdrawn such proposal and (z) within twelve months after such termination, TD Ameritrade enters into a definitive agreement providing for, or completes, an alternative transaction with a third party.

Schwab would be required to pay to TD Ameritrade a termination fee of $950 million if the merger agreement is terminated (x) by TD Ameritrade prior to receipt of Schwab stockholder approval as a result of a change in the recommendation of the Schwab board of directors to the Schwab stockholders to approve the share issuance and the Schwab charter amendment, (y) by TD Ameritrade due to Schwab’s breach in any material respect of the provisions of the merger agreement relating to non-solicitation of alternative transactions or convening the Schwab special meeting as described above or (z) by Schwab or TD Ameritrade if the necessary Schwab stockholder approval is not obtained and, at the time of termination, the merger agreement was terminable under clause (x) or (y) above. In addition, Schwab would be required to pay to TD Ameritrade a termination fee of $950 million if (w) the required vote of Schwab stockholders is not obtained at the Schwab special meeting, (x) prior to such vote, an acquisition of Schwab was publicly disclosed or announced or made



 

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known to the Schwab management or board of directors by a third party, or any third party had publicly announced an intention to make a proposal for an alternative acquisition of Schwab and not timely withdrawn such proposal, (y) the merger agreement is terminated by either party for failure to obtain the required vote of Schwab stockholders and (z) within twelve months after such termination, Schwab enters into a definitive agreement providing for, or completes, an alternative transaction with a third party. Furthermore, Schwab would be required to pay to TD Ameritrade a termination fee of $950 million if (x) Schwab or TD Ameritrade terminates the merger agreement on the basis the merger has not been completed on or prior to the initial end date or the extended end date, as applicable, or TD Ameritrade terminates the merger agreement on the basis of an uncured or incurable breach of representation or warranty, or failure to perform a required covenant, by Schwab (and, in any such case under this clause (x), the required vote of Schwab stockholders has not been obtained at the Schwab special meeting at the time of termination), (y) at or prior to the time of termination, an acquisition of Schwab was publicly proposed or announced or made known to the Schwab management or board of directors by a third party, or any third party had publicly announced an intention to make a proposal for an alternative acquisition of Schwab and not timely withdrawn such proposal and (z) within twelve months after such termination, Schwab enters into a definitive agreement providing for, or completes, an alternative transaction with a third party.

In addition, if Schwab or TD Ameritrade does not obtain the required vote of its stockholders at the applicable stockholders meeting and the merger agreement is terminated in certain circumstances, that party would be required to reimburse the other party for its out-of-pocket fees and expenses actually incurred or accrued in connection with or related to the transactions contemplated by the merger agreement, up to an aggregate amount of $50 million. If the termination fee is also payable by such party, the expense reimbursement payment will be credited against the termination fee.

Specific Performance; Remedies (See Page 175)

Under the merger agreement, each of Schwab and TD Ameritrade is entitled to an injunction to prevent breaches of the merger agreement or to enforce specifically the terms and provisions of the merger agreement, in addition to any other remedy to which that party may be entitled at law or in equity.

Material U.S. Federal Income Tax Consequences of the Merger (See Page 177)

The merger has been structured to qualify as a reorganization for U.S. federal income tax purposes if certain conditions are met. Schwab and TD Ameritrade currently expect those conditions to be met and to report the merger as qualifying as a reorganization for U.S. federal income tax purposes. In addition, each of Schwab and TD Ameritrade has agreed to use its reasonable best efforts (i) to cause the merger to qualify as a reorganization for U.S. federal income tax purposes and (ii) not to, and not to permit or cause any of their respective subsidiaries or affiliates to, take or cause to be taken any action reasonably likely to cause the merger to fail to qualify as a reorganization for U.S. federal income tax purposes. However, the qualification of the merger as a reorganization depends on numerous facts and circumstances, some of which are not known as of the date of this joint proxy statement/prospectus and are outside of the parties’ control. Accordingly, there can be no assurance that the merger will qualify as a reorganization for U.S. federal income tax purposes. The receipt of an opinion from counsel on the qualification of the merger as a reorganization for U.S. federal income tax purposes is not a condition to either party’s obligation to complete the merger, and Schwab and TD Ameritrade have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger. Even if Schwab and TD Ameritrade report the merger as qualifying as a reorganization, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to the position taken by Schwab and TD Ameritrade.

If the merger qualifies as a reorganization, U.S. holders of shares of TD Ameritrade common stock will generally not be subject to U.S. federal income tax as a result of the exchange of their shares of TD Ameritrade



 

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common stock for shares of Schwab common stock (except in connection with cash received in lieu of a fractional share of Schwab common stock) in the merger. If, on the other hand, the merger did not qualify as a reorganization, the merger generally would be a taxable transaction to U.S. holders of shares of TD Ameritrade common stock, and such holders would generally recognize gain or loss in an amount equal to the difference, if any, between (i) the sum of the value of the Schwab common stock received in the merger plus the amount of any cash received instead of fractional shares of Schwab common stock and (ii) such holder’s adjusted tax basis in the shares of TD Ameritrade common stock exchanged in the merger.

The federal income tax consequences described above may not apply to all holders of TD Ameritrade common stock. Your tax consequences will depend on your individual situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

See “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 177 of this joint proxy statement/prospectus

Accounting Treatment (See Page 151)

Schwab prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. The merger will be accounted for using the acquisition method of accounting. Schwab will be treated as the acquirer for accounting purposes.

Rights of TD Ameritrade Stockholders Will Change as a Result of the Merger (See Page 212)

TD Ameritrade stockholders, whose rights are currently governed by TD Ameritrade’s amended and restated certificate of incorporation, which is referred to in this joint proxy statement/prospectus as TD Ameritrade’s charter, TD Ameritrade’s amended and restated by-laws, which are referred to in this joint proxy statement/prospectus as TD Ameritrade’s by-laws, and Delaware law, will upon completion of the merger become stockholders of Schwab and their rights will be governed by the Schwab charter, the Schwab bylaws and Delaware law. As a result, TD Ameritrade stockholders will have different rights once they become Schwab stockholders due to differences between the governing documents of TD Ameritrade and Schwab. These differences are described in detail in the section titled “Comparison of Stockholder Rights” beginning on page 212 of this joint proxy statement/prospectus.

Risk Factors (See Page 66)

You should also carefully consider the risks that are described in the section entitled “Risk Factors” beginning on page 66 of this joint proxy statement/prospectus.



 

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SELECTED HISTORICAL FINANCIAL DATA OF SCHWAB

The Schwab annual historical information is derived from the audited consolidated financial statements of Schwab as of and for each of the years in the five-year period ended December 31, 2019.

The information set forth below is only a summary and should be read in conjunction with Schwab’s historical consolidated financial statements, related notes, and management’s discussion and analysis of financial condition and results of operations contained in Schwab’s respective Annual Reports on Form 10-K, as well as other information that has been filed with the SEC. The audited consolidated statements of income for the years ending December 31, 2019, 2018 and 2017 and the consolidated balance sheets as of December 31, 2019 and 2018 are incorporated by reference into this joint proxy statement/prospectus. For information on where you can obtain copies of this information, see “Where You Can Find More Information” beginning on page 231. The historical results included below and elsewhere in this joint proxy statement/prospectus or incorporated by reference herein are not necessarily indicative of the future performance of Schwab or the combined company after the completion of the merger.

Schwab Selected Financial and Operating Data

(In Millions, Except Per Share Amounts, Ratios, or as Noted)

 

     2019     2018     2017     2016     2015  

Results of Operations

          

Net revenues

   $ 10,721     $ 10,132     $ 8,618     $ 7,478     $ 6,380  

Expenses excluding interest

   $ 5,873     $ 5,570     $ 4,968     $ 4,485     $ 4,101  

Net income

   $ 3,704     $ 3,507     $ 2,354     $ 1,889     $ 1,447  

Net income available to common stockholders

   $ 3,526     $ 3,329     $ 2,180     $ 1,746     $ 1,364  

Earnings per common share:

          

Basic

   $ 2.69     $ 2.47     $ 1.63     $ 1.32     $ 1.04  

Diluted

   $ 2.67     $ 2.45     $ 1.61     $ 1.31     $ 1.03  

Dividends declared per common share

   $ 0.68     $ 0.46     $ 0.32     $ 0.27     $ 0.24  

Weighted-average common shares outstanding:

          

Basic

     1,311       1,348       1,339       1,324       1,315  

Diluted

     1,320       1,361       1,353       1,334       1,327  

Net interest revenue as a percentage of net revenues

     61     57     50     44     40

Asset management and administration fees as a
percentage of net revenues

     30     32     39     41     41

Trading revenue as a percentage of net revenues

     6     8     8     11     14

Effective income tax rate

     23.6     23.1     35.5     36.9     36.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Performance Measures

          

Net revenue growth

     6     18     15     17     5

Pre-tax profit margin

     45.2     45.0     42.4     40.0     35.7

Return on average common stockholders’ equity

     19     19     15     14     12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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     2019     2018     2017     2016     2015  

Financial Condition (at year end)

          

Total assets

   $ 294,005     $ 296,482     $ 243,274     $ 223,383     $ 183,705  

Short-term borrowings

     —         —       $ 15,000       —         —    

Long-term debt

   $ 7,430     $ 6,878     $ 4,753     $ 2,876     $ 2,877  

Preferred stock

   $ 2,793     $ 2,793     $ 2,793     $ 2,783     $ 1,459  

Total stockholders’ equity

   $ 21,745     $ 20,670     $ 18,525     $ 16,421     $ 13,402  

Assets to stockholders’ equity ratio

     14       14       13       14       14  

Debt to total capital ratio (1)

     25     25     52     15     18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Employee Information

          

Full-time equivalent employees (at year end, in thousands)

     19.7       19.5       17.6       16.2       15.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The Debt to total capital ratio is computed using the formula: Total Debt (short and long-term) / (Total Debt + Stockholders’ Equity).



 

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SELECTED HISTORICAL FINANCIAL DATA OF TD AMERITRADE

The following tables present selected historical consolidated financial data of TD Ameritrade. The selected consolidated historical financial data of TD Ameritrade as of and for the three months ended December 31, 2019 has been derived from TD Ameritrade’s unaudited condensed consolidated financial statements as of and for the three months ended December 31, 2019, incorporated by reference into this joint proxy statement/prospectus. The selected consolidated historical financial data of TD Ameritrade as of and for the three months ended December 31, 2018 has been derived from TD Ameritrade’s unaudited condensed consolidated financial statements as of and for the three months ended December 31, 2018, not incorporated by reference into this joint proxy statement/prospectus. The selected consolidated historical financial data of TD Ameritrade as of September 30, 2019 and 2018, and for the fiscal years ended September 30, 2019, 2018 and 2017, has been derived from TD Ameritrade’s audited consolidated financial statements and accompanying notes incorporated by reference into this joint proxy statement/prospectus. The selected consolidated historical financial data as of September 30, 2017, 2016 and 2015, and for the fiscal years ended September 30, 2016 and 2015, has been derived from TD Ameritrade’s audited consolidated financial statements and accompanying notes not appearing or incorporated by reference into this joint proxy statement/prospectus.

The financial information set forth below is only a summary. You should read the following financial information relating to TD Ameritrade in conjunction with the other information contained in this joint proxy statement/prospectus, including the consolidated financial statements of TD Ameritrade and accompanying notes appearing in the TD Ameritrade 2019 10-K and in the Quarterly Reports on Form 10-Q of TD Ameritrade filed with the SEC after the TD Ameritrade 2019 10-K was filed and the financial statements in any Current Report on Form 8-K of TD Ameritrade that was filed with the SEC after the TD Ameritrade 2019 10-K was filed, each of which reports is incorporated by reference into this joint proxy statement/prospectus. TD Ameritrade’s historical results for any prior period are not necessarily indicative of results to be expected in any future period, and TD Ameritrade’s historical results for the three months ended December 31, 2019 are not necessarily indicative of its results to be expected for the fiscal year ended September 30, 2020. TD Ameritrade has completed acquisitions in recent fiscal periods. The results and other financial information of those acquired operations are not included in the table below for the periods or dates prior to their respective acquisition dates and, therefore, the results for these prior periods are not comparable in all respects and may not be predictive of TD Ameritrade’s future results. In addition, the selected historical consolidated financial information in the tables below does not include, on any basis, the results or financial condition of Schwab for any period or as of any date. For more information, see “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus.

 

     Three Months
Ended
December 31,
     Fiscal Year Ended September 30,  
     2019      2018      2019      2018*      2017      2016      2015  
     (in millions, except per share amounts)  

Consolidated Statements of Income Data:

                    

Net revenues

   $ 1,291      $ 1,516      $ 6,016      $ 5,452      $ 3,676      $ 3,327      $ 3,247  

Operating income

     521        796        3,001        1,998        1,466        1,318        1,325  

Net income

     379        604        2,208        1,473        872        842        813  

Earnings per share – basic

   $ 0.70      $ 1.07      $ 3.98      $ 2.60      $ 1.65      $ 1.59      $ 1.50  

Earnings per share – diluted

   $ 0.70      $ 1.07      $ 3.96      $ 2.59      $ 1.64      $ 1.58      $ 1.49  

Weighted average shares outstanding – basic

     541        562        555        567        529        531        543  

Weighted average shares outstanding – diluted

     543        564        557        569        531        534        547  

Dividends declared per share

   $ 0.31      $ 0.30      $ 1.20      $ 0.84      $ 0.72      $ 0.68      $ 0.60  


 

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     As of
December 31,
     As of September 30,  
     2019      2018      2019      2018      2017*      2016      2015  
     (in millions)  

Consolidated Balance Sheet Data:

                    

Cash and cash equivalents

   $ 2,551      $ 5,117      $ 2,852      $ 2,690      $ 1,472      $ 1,855      $ 1,978  

Investments available-for-sale, at fair value

     1,636        884        1,668        484        746        757        —    

Total assets

     43,481        37,191        43,786        37,520        38,627        28,818        26,375  

Long-term debt and other borrowings

     3,555        3,484        3,594        2,535        2,652        1,817        1,800  

Stockholders’ equity

     8,747        8,357        8,700        8,003        7,247        5,051        4,903  

 

*

The growth in TD Ameritrade’s consolidated balance sheet as of September 30, 2017 and consolidated statement of income for the fiscal year ended September 30, 2018 was primarily due to TD Ameritrade’s acquisition of Scottrade Financial Services, Inc. on September 18, 2017.



 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The selected unaudited pro forma condensed combined financial data presented below, which is referred to in this joint proxy statement/prospectus as the selected pro forma financial data, is based on the separate historical consolidated financial statements of Schwab and TD Ameritrade after giving effect to the acquisition of TD Ameritrade by Schwab and the exchange of Schwab common shares for shares of TD Ameritrade common stock in connection therewith. The pro forma statement of income data for the year ended December 31, 2019 is presented as if the merger occurred on January 1, 2019. The pro forma balance sheet data as of December 31, 2019 is presented as if the merger occurred on December 31, 2019. The selected pro forma financial data also does not reflect potential revenue enhancements (or the necessary costs to achieve such benefits), cost savings, or operating synergies that Schwab expects to realize after the merger. In addition, the pro forma financial data does not reflect restructuring or exit costs, which may be incurred by Schwab in connection with the merger.

The selected pro forma financial data, which is preliminary in nature, has been prepared from, and should be read in conjunction with, (i) the more detailed unaudited pro forma condensed combined financial statements and the related notes appearing in the section entitled “Schwab Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 48, and (ii) the separate historical consolidated financial statements and related notes of each of Schwab and TD Ameritrade included elsewhere in this joint proxy statement/prospectus and incorporated by reference herein (see “Where You Can Find More Information” beginning on page 231).

The selected pro forma financial data is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or consolidated financial position of Schwab would have been had the merger occurred on the dates assumed, nor is it necessarily indicative of Schwab’s future consolidated results of operations or consolidated financial position.

 

(In Millions, Except Per Share Amounts)

   For the Year
Ended/As of
December 31, 2019
 

Results of Operations

  

Total net revenues

   $ 16,554  

Net income available to common stockholders

   $ 5,273  

Basic earnings per common share

   $ 2.78  

Diluted earnings per common share

   $ 2.76  

Weighted-average basic shares outstanding

     1,897  

Weighted-average diluted shares outstanding

     1,908  

Financial Position

  

Total assets

   $ 353,863  

Long-term debt

   $ 11,098  

Stockholders’ equity

   $ 44,242  


 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table sets forth selected historical per share information of Schwab and TD Ameritrade and unaudited pro forma combined consolidated per share information after giving effect to the merger. You should read this information in conjunction with (i) the selected historical consolidated financial information and the related notes included elsewhere in this joint proxy statement/prospectus, (ii) the historical consolidated financial statements of Schwab and TD Ameritrade and related notes contained in Schwab’s and TD Ameritrade’s respective Annual Reports on Form 10-K for the years ended December 31, 2019, and September 30, 2019, respectively, which are referred to in this joint proxy statement/prospectus as the Schwab 2019 10-K and the TD Ameritrade 2019 10-K, respectively, and TD Ameritrade’s Quarterly Report on Form 10-Q for the three months ended December 31, 2019, which are incorporated by reference into this joint proxy statement/prospectus, and (iii) the financial information contained in the “Schwab Unaudited Pro Forma Condensed Combined Financial Statements” and the related notes thereto beginning on page 48. The historical per share information is derived from audited financial statements of Schwab as of and for the year ended December 31, 2019, and TD Ameritrade as of and for the year ended September 30, 2019 and unaudited financial statements for the three months ended December 31, 2019 and 2018.

The unaudited pro forma combined consolidated per share information has been presented for illustrative purposes only and is based on assumptions and estimates considered appropriate by Schwab’s management. The pro forma data presented does not represent what the actual results of operations and financial position would have been had the companies actually been combined as of the beginning of the periods presented and is not necessarily indicative of the future consolidated results of operations or financial position of the combined company. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma per share financial information.

Schwab and TD Ameritrade declared and paid dividends during the periods presented. For more information on dividends of Schwab and TD Ameritrade, see “Comparative Per Share Market Price and Dividend Information” beginning on page 46.

 

     For the
Year Ended/As of
December 31, 2019
 

Schwab Historical per Common Share Data:

  

Earnings-basic

   $ 2.69  

Earnings-diluted

   $ 2.67  

Book value (1)

   $ 16.91  

TD Ameritrade Historical per Common Share Data (2):

  

Earnings-basic

   $ 3.61  

Earnings-diluted

   $ 3.59  

Book value (1)

   $ 16.18  

Unaudited Pro Forma Combined per Common Share Data:

  

Earnings-basic

   $ 2.78  

Earnings-diluted

   $ 2.76  

Book value (3)

   $ 23.63  

TD Ameritrade Unaudited Pro Forma Combined per Common Share Data (4):

  

Earnings-basic

   $ 3.01  

Earnings-diluted

   $ 2.99  

Book value

   $ 25.61  

 

(1)

Amount is calculated by dividing stockholders’ equity by the number of common shares outstanding as of December 31, 2019.



 

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(2)

Derived from the December 31, 2019 trailing twelve month financial information as shown on the Pro Forma Statement of Income.

(3)

Amount is calculated by dividing pro forma stockholders’ equity as of December 31, 2019 by the pro forma number of common shares outstanding as of December 31, 2019.

(4) 

The TD Ameritrade unaudited pro forma equivalent data was calculated by multiplying the combined company unaudited pro forma data by the share exchange ratio of 1.0837.



 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Market Prices

The following table sets forth the closing price per share of Schwab common stock and per share of TD Ameritrade common stock as reported on the NYSE and NASDAQ on November 20, 2019, the last trading day prior to the publication of media reports regarding the merger, on November 22, 2019, the last trading day prior to public announcement of the merger by Schwab and TD Ameritrade, and on [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus for which this information was available. The table also shows the implied value of the merger consideration for each share of TD Ameritrade common stock as of the same dates. This implied value was calculated by multiplying the closing price of a share of Schwab common stock on the relevant date by the exchange ratio.

 

     Schwab
Common
Stock
     TD
Ameritrade
Common
Stock
     Implied Per
Share Value of
Merger
Consideration
 

November 20, 2019

   $ 44.75      $ 41.38      $ 48.50  

November 22, 2019

   $ 48.20      $ 48.13      $ 52.23  

[], 2020

   $ [●]      $ [●]      $ [●]  

The market prices of shares of Schwab common stock and TD Ameritrade common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the dates of the TD Ameritrade special meeting and the Schwab special meeting and the date the merger is completed. No assurance can be given concerning the market prices of shares of Schwab common stock and shares of TD Ameritrade common stock before completion of the merger or shares of Schwab common stock after completion of the merger. The exchange ratio is fixed in the merger agreement, but the market price of shares of Schwab common stock (and therefore the value of the merger consideration) when received by TD Ameritrade stockholders after the merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, TD Ameritrade stockholders are advised to obtain current market quotations for shares of Schwab common stock and shares of TD Ameritrade common stock in deciding whether to vote for approval and adoption of the merger agreement.

Dividends

Schwab currently pays a quarterly dividend on shares of Schwab common stock and last paid a quarterly dividend on February 28, 2020 of $0.18 per share. Under the terms of the merger agreement, during the period before completion of the merger, Schwab is not permitted to declare, set aside or pay any dividend or make any other distribution other than its regular cash dividend in the ordinary course of business consistent with past practice in an amount not to exceed (i) for the fourth quarter of 2019, $0.17 per share and (ii) for subsequent quarters, an amount approved by the Schwab board of directors consistent with certain requirements.

TD Ameritrade currently pays a quarterly dividend on shares of TD Ameritrade common stock, and last paid a quarterly dividend on February 19, 2020 of $0.31 per share. Under the terms of the merger agreement, during the period before completion of the merger, TD Ameritrade is not permitted to declare, set aside or pay any dividend or other distribution other than its regular cash dividend in the ordinary course of business consistent with past practice in an amount not to exceed $0.31 per share per quarter, as such amount may be increased for the fiscal year ended September 30, 2021 if the merger is not completed prior to September 30, 2020, which amount must not exceed $0.33 per share per quarter.



 

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In addition, the merger agreement provides that Schwab and TD Ameritrade will coordinate the declaration of, record dates for and payment of dividends in respect of their respective shares in order that holders of shares of Schwab common stock and TD Ameritrade common stock do not receive two dividends or fail to receive one dividend for any quarter in respect of shares of TD Ameritrade common stock, on the one hand, and shares of Schwab common stock issuable in the merger, on the other hand.

After completion of the merger, any former TD Ameritrade stockholder who holds Schwab common shares into which shares of TD Ameritrade common stock have been converted in connection with the merger will receive whatever dividends are declared and paid on Schwab common shares. However, no dividend or other distribution having a record date after completion of the merger will actually be paid with respect to any Schwab common shares into which shares of TD Ameritrade common stock have been converted in connection with the merger until the certificates formerly representing shares of TD Ameritrade common stock have been surrendered (or the book-entry shares formerly representing shares of TD Ameritrade common stock have been transferred), at which time any accrued dividends and other distributions on those Schwab common shares with a payment date prior to such date will be paid without interest. Subject to the limitations set forth in the merger agreement, any future dividends by Schwab will be made at the discretion of the Schwab board of directors. Subject to the limitations set forth in the merger agreement, any future dividends by TD Ameritrade will be made at the discretion of the TD Ameritrade board of directors. There can be no assurance that any future dividends will be declared or paid by Schwab or TD Ameritrade or as to the amount or timing of those dividends, if any.



 

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SCHWAB UNAUDITED

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On November 24, 2019, Schwab entered into the merger agreement with TD Ameritrade and Merger Sub. Upon the terms and subject to the conditions of the merger agreement, Merger Sub will merge with and into TD Ameritrade pursuant to the merger, with TD Ameritrade surviving as a wholly owned subsidiary of Schwab. The merger agreement was unanimously approved by the Schwab board of directors and the TD Ameritrade board of directors, acting upon the unanimous recommendation of the strategic development committee.

If the merger is completed, TD Ameritrade stockholders immediately prior to the effective time of the merger will receive, in exchange for each share of TD Ameritrade common stock owned immediately prior to the merger, 1.0837 shares of Schwab common stock, as described in more detail in the accompanying joint proxy statement/prospectus under the heading “The Merger Agreement—Merger Consideration.” Fractional shares of Schwab common stock will not be issued to TD Ameritrade stockholders, who will receive cash in lieu of fractional shares following the closing of the merger. The cash payment for the fractional shares is not anticipated to be material.

The following unaudited Pro Forma Condensed Combined Balance Sheet, which is referred to in this joint proxy statement/prospectus as the Pro Forma Balance Sheet, and unaudited Pro Forma Condensed Combined Statement of Income, which is referred to in this joint proxy statement/prospectus as the Pro Forma Statement of Income, and which, together with the Pro Forma Balance Sheet, are referred to in this joint proxy statement/prospectus as the Pro Forma Financial Statements or the Statements, are based on the separate historical consolidated financial statements of Schwab and TD Ameritrade after giving effect to the acquisition of TD Ameritrade by Schwab and the exchange of Schwab’s common stock for TD Ameritrade’s outstanding common stock in connection therewith, and the assumptions and adjustments described in the accompanying notes to the Pro Forma Financial Statements. The Pro Forma Balance Sheet as of December 31, 2019 is presented as if the merger occurred on December 31, 2019. The Pro Forma Statement of Income for the year ended December 31, 2019 is presented as if the merger occurred on January 1, 2019. The historical financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the Pro Forma Statement of Income only, expected to have a continuing impact on the combined results of operations.

Due to the timing of the merger, the estimates of fair value are preliminary and are dependent upon certain valuations that have not progressed to a stage where there is sufficient information to make a definitive valuation. The unaudited pro forma adjustments, including the allocations of the merger consideration and the fair value of the replaced TD Ameritrade equity awards attributable to pre-combination services, collectively referred to in this section only of this joint proxy statement/prospectus as the Purchase Price, have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. The determination of estimated fair values requires management to make significant estimates and assumptions, which are described in the accompanying notes to the Pro Forma Financial Statements, based on currently available information. Schwab believes that the information available provides a reasonable basis to estimate the fair values of assets acquired and liabilities assumed; however, these preliminary estimates may be adjusted upon the availability of new information regarding facts and circumstances as they exist at the date of the merger. Therefore, there can be no assurance that such changes will not be material. A final determination of the Purchase Price and fair values of TD Ameritrade’s assets and liabilities will be based on the actual tangible and intangible assets and liabilities of TD Ameritrade that exist as of the date of the merger.

The Statements are provided for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations that might have been achieved had the merger been completed as of the dates indicated, nor are they meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the merger. The Pro



 

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Forma Financial Statements also do not reflect potential revenue enhancements (or the necessary costs to achieve such benefits), cost savings, or operating synergies that Schwab expects to realize after the merger. In addition, the Pro Forma Statement of Income does not reflect restructuring or exit costs, which may be incurred by Schwab in connection with the merger.

The preparation of the Pro Forma Financial Statements and related adjustments required management to make certain assumptions and estimates. The Statements should be read together with:

 

   

The accompanying notes to the Pro Forma Financial Statements;

 

   

Schwab’s audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2019, included in the Schwab 2019 10-K;

 

   

TD Ameritrade’s unaudited historical consolidated financial statements and accompanying notes as of and for the quarter ended December 31, 2019 included in TD Ameritrade’s Form 10-Q filed with the SEC on January 31, 2020; and

 

   

TD Ameritrade’s audited historical consolidated financial statements and accompanying notes as of and for the year ended September 30, 2019, included in the TD Ameritrade 2019 10-K.



 

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THE CHARLES SCHWAB CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2019

 

(In Millions)

  Schwab
Historical—After
Reclassification

(Note 3)
    TD Ameritrade
Historical—After
Reclassification

(Note 3)
    Pro Forma
Adjustments
   

Ref.

(Note 5)

  Schwab and
TD
Ameritrade
Combined
 

Assets

         

Cash and cash equivalents

  $ 29,345     $ 2,551     $ —         $ 31,896  

Cash and investments segregated and on deposit for regulatory purposes

    20,483       8,536       —           29,019  

Receivables from brokerage clients—net

    21,767       21,187       —           42,954  

Available for sale securities

    61,422       1,636       —           63,058  

Held to maturity securities

    134,706       —         —           134,706  

Bank loans—net

    18,212       —         —           18,212  

Equipment, office facilities, and property—net

    2,128       895       (93   (5a)     2,930  

Acquired intangible assets—net

    128       1,174       9,916     (5b)     11,218  

Goodwill

    1,227       4,227       6,511     (5c)     11,965  

Other assets

    4,587       3,275       43     (5d)     7,905  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

  $ 294,005     $ 43,481     $ 16,377       $ 353,863  
 

 

 

   

 

 

   

 

 

     

 

 

 

Liabilities and Stockholders’ Equity

         

Bank deposits

  $ 220,094     $ —       $ —         $ 220,094  

Payables to brokerage clients

    39,220       27,351       —           66,571  

Accrued expenses and other liabilities

    5,516       3,828       2,514     (5e)/(5f)     11,858  

Long-term debt

    7,430       3,555       113     (5g)     11,098  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

    272,260       34,734       2,627         309,621  
 

 

 

   

 

 

   

 

 

     

 

 

 

Stockholders’ equity:

         

Preferred stock

    2,793       —         —           2,793  

Common stock

    15       7       (2   (5h)     20  

Common stock—nonvoting

    —         —         1     (5i)     1  

Additional paid-in capital

    4,656       3,459       19,054     (5j)     27,169  

Retained earnings

    19,960       8,790       (8,812   (5k)     19,938  

Treasury stock, at cost

    (5,767     (3,527     3,527     (5l)     (5,767

Accumulated other comprehensive income (loss)

    88       18       (18   (5m)     88  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total stockholders’ equity

    21,745       8,747       13,750         44,242  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 294,005     $ 43,481     $ 16,377       $ 353,863  
 

 

 

   

 

 

   

 

 

     

 

 

 

See accompanying Notes to Unaudited Pro Forma Financial Statements.



 

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THE CHARLES SCHWAB CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2019

 

(In Millions, Except Per Share Amounts)

  Schwab
Historical—After
Reclassification

(Note 3)
    TD Ameritrade
Historical—After
Reclassification

(Note 3)
    Pro Forma
Adjustments
   

Ref.

(Note 6)

(Note 7)

  Schwab and
TD
Ameritrade
Combined
 

Net Revenues

         

Interest revenue

  $ 7,580     $ 1,550     $ (5   (6a)   $ 9,125  

Interest expense

    (1,064     (178     25     (6b)/(6c)     (1,217
 

 

 

   

 

 

   

 

 

     

 

 

 

Net interest revenue

    6,516       1,372       20         7,908  

Asset management and administration fees

    3,211       588       —           3,799  

Trading revenue

    752       1,770       —           2,522  

Bank deposit account fees

    —         1,743       106     (6d)     1,849  

Other

    242       234       —           476  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total net revenues

    10,721       5,707       126         16,554  
 

 

 

   

 

 

   

 

 

     

 

 

 

Expenses Excluding Interest

         

Compensation and benefits

    3,320       1,336       (9   (6e)     4,647  

Professional services

    702       317       (37   (6f)     982  

Occupancy and equipment

    559       264       (3   (6g)     820  

Advertising and market development

    307       320       —           627  

Communications

    253       151       —           404  

Depreciation and amortization

    322       155       (89   (6h)     388  

Amortization of acquired intangible assets

    27       124       577     (6i)     728  

Regulatory fees and assessments

    122       47       —           169  

Other

    261       351       —           612  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total expenses excluding interest

    5,873       3,065       439         9,377  
 

 

 

   

 

 

   

 

 

     

 

 

 

Income before taxes on income

    4,848       2,642       (313       7,177  

Taxes on income

    1,144       659       (77   (6j)     1,726  
 

 

 

   

 

 

   

 

 

     

 

 

 

Net Income

    3,704       1,983       (236       5,451  
 

 

 

   

 

 

   

 

 

     

 

 

 

Preferred stock dividends and other

    178       —         —           178  
 

 

 

   

 

 

   

 

 

     

 

 

 

Net Income Available to Common Stockholders

  $ 3,526     $ 1,983     $ (236     $ 5,273  
 

 

 

   

 

 

   

 

 

     

 

 

 

Weighted-Average Common Shares Outstanding:

         

Basic

    1,311       550       (7)     1,897  

Diluted

    1,320       552       (7)     1,908  
 

 

 

   

 

 

       

 

 

 

Earnings Per Common Share Outstanding (1):

         

Basic

  $ 2.69     $ 3.61       (7)   $ 2.78  

Diluted

  $ 2.67     $ 3.59       (7)   $ 2.76  

 

 

(1) 

As the participation rights, including dividend and liquidation rights, are identical between the voting common stock and nonvoting common stock classes, basic and diluted earnings per share are the same for each class.

See accompanying Notes to Unaudited Pro Forma Financial Statements.



 

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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

1. Basis of Pro Forma Presentation

The Pro Forma Financial Statements were prepared in accordance with Article 11 of SEC Regulation S-X. Schwab’s fiscal year end is December 31 and TD Ameritrade’s fiscal year end is September 30. The Pro Forma Balance Sheet as of December 31, 2019 combines Schwab’s historical audited consolidated balance sheet as of December 31, 2019 and TD Ameritrade’s historical unaudited condensed consolidated balance sheet as of December 31, 2019, giving effect to the merger as if it was completed on December 31, 2019.

The Pro Forma Statement of Income combines the Schwab historical audited consolidated statement of income for the year ended December 31, 2019 and the TD Ameritrade adjusted historical consolidated statement of income for the trailing twelve months ended December 31, 2019. For the purpose of preparing the Pro Forma Statement of Income for the year ended December 31, 2019, the “TD Ameritrade Historical—After Reclassification” column, which represents the trailing twelve month period ended December 31, 2019, was derived by subtracting TD Ameritrade’s historical unaudited condensed consolidated statement of income for the three months ended December 31, 2018 from its historical audited consolidated statement of income for the year ended September 30, 2019, and by adding TD Ameritrade’s historical unaudited condensed consolidated statement of income for the three months ended December 31, 2019.

Certain financial information of TD Ameritrade, as presented in its historical consolidated financial statements, has been reclassified to conform to the historical presentation in Schwab’s consolidated financial statements for the purpose of preparing the unaudited Pro Forma Financial Statements. Certain financial information of Schwab, as presented in its historical consolidated financial statements, has been reclassified for the purpose of preparing the unaudited Pro Forma Financial Statements to reflect planned changes in Schwab’s presentation subsequent to the merger. Refer to Note 3 of the Statements for explanations of these reclassifications.

The merger will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations, which is referred to in this joint proxy statement/prospectus as ASC 805, with Schwab as the acquirer for accounting purposes. Under ASC 805, the total Purchase Price was calculated as described in Note 4 of the Statements. The assets acquired and liabilities assumed from TD Ameritrade have been measured at their estimated fair values on the assumed acquisition date, except for certain exceptions to the recognition principle of acquisition accounting, such as leases, share-based payments, and income taxes. The excess of the Purchase Price over the assets acquired and liabilities assumed is allocated to goodwill. Subsequent to the completion of the merger, Schwab and TD Ameritrade will finalize an integration plan, which may affect how the assets acquired, including intangible assets, will be utilized by the combined company.

The income tax effects of pro forma adjustments are calculated based on a blended U.S. federal and state statutory tax rate of 24.32%.

Upon consummation of the merger and the completion of a valuation, the Purchase Price as well as the estimated fair values of the assets and liabilities will be updated and finalized as soon as practicable, but not later than one year from the merger date.

2. Accounting Policies

As part of preparing the Pro Forma Financial Statements, Schwab conducted a preliminary review of the accounting policies of TD Ameritrade, but did not note any material differences in accounting policies that would



 

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require pro forma adjustments to conform to Schwab’s accounting policies. Further, Schwab considered the difference in TD Ameritrade’s fiscal year end and its impact on the adoption of new accounting standards and noted no material impacts.

Upon consummation of the merger, a more comprehensive review of the accounting policies of TD Ameritrade will be performed, which may identify other differences among the accounting policies of Schwab and TD Ameritrade that, when conformed, could have a material impact on the Pro Forma Financial Statements.

The accounting policies used in the preparation of the Statements are those set out in Schwab’s audited consolidated financial statements as of and for the year ended December 31, 2019.

3. Reclassification Adjustments

Schwab Reclassification Adjustments

Schwab financial information in the “Schwab Historical—After Reclassification” columns of the Pro Forma Balance Sheet and Pro Forma Statement of Income represents Schwab’s historical reported balances reclassified to conform to the presentation of the combined entity. Unless otherwise indicated, defined line items included in the notes have the meanings given to them in Schwab’s historical financial statements.

Reclassifications of the Balance Sheet—Assets as of December 31, 2019

 

(In Millions)

   Before
Reclassification
     Reclassification
Amount
   

Ref.

   After
Reclassification
 

Assets

          

Cash and cash equivalents

   $ 29,345      $ —          $ 29,345  

Cash and investments segregated and on deposit for regulatory purposes

     20,483        —            20,483  

Receivables from brokerage clients—net

     21,767        —            21,767  

Available for sale securities

     61,422        —            61,422  

Held to maturity securities

     134,706        —            134,706  

Bank loans—net

     18,212        —            18,212  

Equipment, office facilities, and property—net

     2,128        —            2,128  

Acquired intangible assets—net

     —          128     (3a)      128  

Goodwill

     1,227        —            1,227  

Other assets

     4,715        (128   (3a)      4,587  
  

 

 

    

 

 

      

 

 

 

Total assets

   $ 294,005      $ —          $ 294,005  
  

 

 

    

 

 

      

 

 

 

 

3a)

Historically, acquired intangible assets were included in Other assets due to their insignificant size. As a result of the contemplated acquisition of TD Ameritrade, Schwab anticipates that the acquired intangible assets of the combined entity will be a meaningful balance warranting separate presentation on the balance sheet.



 

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Reclassifications of the Statement of Income—Net Revenues and Expenses Excluding Interest for the Year Ended December 31, 2019

 

(In Millions)

   Before
Reclassification
    Reclassification
Amount
   

Ref.

   After
Reclassification
 

Net Revenues

         

Interest revenue

   $ 7,580     $ —          $ 7,580  

Interest expense

     (1,064     —            (1,064
  

 

 

   

 

 

      

 

 

 

Net interest revenue

     6,516       —            6,516  

Asset management and administration fees

     3,211       —            3,211  

Trading revenue

     617       135     (3b)      752  

Other

     377       (135   (3b)      242  
  

 

 

   

 

 

      

 

 

 

Total net revenues

   $ 10,721     $ —          $ 10,721  
  

 

 

   

 

 

      

 

 

 

Expenses Excluding Interest

         

Compensation and benefits

   $ 3,320     $ —          $ 3,320  

Professional services

     702       —            702  

Occupancy and equipment

     559       —            559  

Advertising and market development

     307       —            307  

Communications

     253       —            253  

Depreciation and amortization

     349       (27   (3c)      322  

Amortization of acquired intangible assets

     —         27     (3c)      27  

Regulatory fees and assessments

     122       —            122  

Other

     261       —            261  
  

 

 

   

 

 

      

 

 

 

Total expenses excluding interest

   $ 5,873     $ —          $ 5,873  
  

 

 

   

 

 

      

 

 

 

 

3b)

Reclassification of order flow revenue from Other to Trading revenue to conform with TD Ameritrade’s historical presentation of order flow revenue with commissions. TD Ameritrade’s commissions and order flow revenue were reclassified from Commissions and transaction fees to Trading revenue as noted in reference (3l).

3c)

Historically, amortization of acquired intangible assets was included in Depreciation and amortization due to its insignificant size. As a result of the contemplated acquisition of TD Ameritrade, Schwab anticipates that amortization of acquired intangible assets for the combined entity will be a meaningful balance warranting separate presentation in the statement of income. This reclassification also conforms to TD Ameritrade’s historical presentation.

TD Ameritrade Reclassification Adjustments

TD Ameritrade financial information in the “TD Ameritrade Historical—After Reclassification” columns of the Pro Forma Balance Sheet and Pro Forma Statement of Income represents the historical reported balances of TD Ameritrade reclassified to conform to the presentation in Schwab’s financial statements. Unless otherwise indicated, defined line items included in the notes have the meanings given to them in the historical financial statements of TD Ameritrade.



 

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Reclassifications of the Balance Sheet as of December 31, 2019

 

(In Millions)

  Before
Reclassification
    Reclassification
Amount
   

Ref.

   After
Reclassification
 

Assets

        

Cash and cash equivalents

  $ 2,551     $ —          $ 2,551  

Cash and investments segregated and on deposit for regulatory purposes

    8,536       —            8,536  

Receivable from brokers, dealers, and clearing organizations

    1,728       (1,728   (3d)      —    

Receivable from clients, net

    21,187       (21,187   (3e)      —    

Receivables from brokerage clients—net

    —         21,187     (3e)      21,187  

Receivable from affiliates

    121       (121   (3d)      —    

Other receivables, net

    277       (277   (3d)      —    

Securities owned, at fair value

    520       (520   (3d)      —    

Investments available-for-sale, at fair value

    1,636       (1,636   (3f)      —    

Available for sale securities

    —         1,636     (3f)      1,636  

Property and equipment at cost, net

    895       (895   (3g)      —    

Equipment, office facilities, and property—net

    —         895     (3g)      895  

Goodwill

    4,227       —            4,227  

Acquired intangible assets, net

    1,174       (1,174   (3h)      —    

Acquired intangible assets—net

    —         1,174     (3h)      1,174  

Other assets

    629       2,646     (3d)      3,275  
 

 

 

   

 

 

      

 

 

 

Total assets

  $ 43,481     $ —          $ 43,481  
 

 

 

   

 

 

      

 

 

 

Liabilities and Stockholders’ Equity

        

Payable to brokers, dealers, and clearing organizations

  $ 2,482     $ (2,482   (3i)    $ —    

Payable to clients

    27,351       (27,351   (3j)      —    

Payables to brokerage clients

    —         27,351     (3j)      27,351  

Accounts payable and other liabilities

    1,087       (1,087   (3i)      —    

Accrued expenses and other liabilities

    —         3,828     (3i)      3,828  

Payable to affiliates

    3       (3   (3i)      —    

Long-term debt

    3,555       —            3,555  

Deferred income taxes

    256       (256   (3i)      —    
 

 

 

   

 

 

      

 

 

 

Total liabilities

    34,734       —            34,734  
 

 

 

   

 

 

      

 

 

 

Stockholders’ equity:

        

Preferred stock

    —         —            —    

Common stock

    7       —            7  

Additional paid-in capital

    3,459       —            3,459  

Retained earnings

    8,790       —            8,790  

Treasury stock, common, at cost

    (3,527     3,527     (3k)      —    

Treasury stock, at cost

    —         (3,527   (3k)      (3,527

Accumulated other comprehensive income

    18       —            18  
 

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

    8,747       —            8,747  
 

 

 

   

 

 

      

 

 

 

Total liabilities and stockholders’ equity

  $ 43,481     $ —          $ 43,481  
 

 

 

   

 

 

      

 

 

 

 

3d)

Reclassifications of Receivable from brokers, dealers and clearing organizations, Receivable from affiliates, Other receivables, net, and Securities owned, at fair value to Other assets to conform with Schwab’s financial statement line item presentation.



 

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3e)

Reclassification of Receivable from clients, net to Receivables from brokerage clients — net to conform with Schwab’s financial statement line item presentation.

3f)

Reclassification of Investments available-for-sale, at fair value to Available for sale securities to conform with Schwab’s financial statement line item presentation.

3g)

Reclassification of Property and equipment at cost, net to Equipment, office facilities, and property — net to conform with Schwab’s financial statement line item presentation.

3h)

Reclassification of Acquired intangible assets, net to Acquired intangible assets — net to conform with Schwab’s financial statement line item presentation.

3i)

Reclassifications of Payable to brokers, dealers and clearing organizations, Accounts payable and other liabilities, Payable to affiliates, and Deferred income taxes to Accrued expenses and other liabilities to conform with Schwab’s financial statement line item presentation.

3j)

Reclassification of Payable to clients to Payables to brokerage clients to conform with Schwab’s financial statement line item presentation.

3k)

Reclassification of Treasury stock, common, at cost to Treasury stock, at cost to conform with Schwab’s financial statement line item presentation.



 

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Reclassifications of the Statement of Income for the Year Ended December 31, 2019

 

(In Millions)

   Before
Reclassification
    Reclassification
Amount
   

Ref.

   After
Reclassification
 

Revenues

         

Transaction-based revenues:

         

Commissions and transaction fees

   $ 1,770     $ (1,770   (3l)    $ —    

Trading revenue

     —         1,770     (3l)      1,770  

Asset-based revenues:

         

Bank deposit account fees

     1,743       —            1,743  

Interest revenue

     —         1,550     (3m)      1,550  

Interest expense

     —         (178   (3m)/(3n)      (178
  

 

 

   

 

 

      

 

 

 

Net interest revenue

     —         1,372          1,372  

Net interest revenue

     1,516       (1,516   (3m)      —    

Investment product fees

     588       (588   (3o)      —    

Asset management and administration fees

     —         588     (3o)      588  
  

 

 

   

 

 

      

 

 

 

Total asset-based revenues

     3,847       (144        3,703  

Other revenues

     174       (174   (3p)      —    

Other

     —         234     (3p)      234  
  

 

 

   

 

 

      

 

 

 

Net revenues

     5,791       (84        5,707  
  

 

 

   

 

 

      

 

 

 

Operating Expenses

         

Employee compensation and benefits

     1,336       (1,336   (3q)      —    

Compensation and benefits

     —         1,336     (3q)      1,336  

Clearing and execution costs

     210       (210   (3r)      —    

Communications

     151       —            151  

Occupancy and equipment costs

     264       (264   (3s)      —    

Occupancy and equipment

     —         264     (3s)      264  

Depreciation and amortization

     155       —            155  

Amortization of acquired intangible assets

     124       —            124  

Professional services

     317       —            317  

Advertising

     320       (320   (3t)      —    

Advertising and market development

     —         320     (3t)      320  

Regulatory fees and assessments

     —         47     (3r)/(3u)      47  

Other

     188       163     (3r)/(3u)      351  
  

 

 

   

 

 

      

 

 

 

Total operating expenses

     3,065       —            3,065  
  

 

 

   

 

 

      

 

 

 

Operating income

     2,726       (84        2,642  

Other expense (income):

         

Interest on borrowings

     144       (144   (3n)      —    

Gain on business-related divestiture

     (60     60     (3p)      —    
  

 

 

   

 

 

      

 

 

 

Total other expense (income)

     84       (84        —    
  

 

 

   

 

 

      

 

 

 

Pre-tax income

     2,642       —            2,642  

Provision for income taxes

     659       (659   (3v)      —    

Taxes on income

     —         659     (3v)      659  
  

 

 

   

 

 

      

 

 

 

Net Income

   $ 1,983     $ —          $ 1,983  
  

 

 

   

 

 

      

 

 

 

 

3l)

Reclassification of Commissions and transaction fees to Trading revenue to conform with Schwab’s financial statement line item presentation.



 

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3m)

Reclassification of Net interest revenue to Interest revenue and Interest expense, on a gross basis, to conform with Schwab’s financial statement line item presentation.

3n)

Reclassification of Interest on borrowings to Interest expense to conform with Schwab’s financial statement line item presentation.

3o)

Reclassification of Investment product fees to Asset management and administration fees to conform with Schwab’s financial statement line item presentation.

3p)

Reclassifications of Other revenues and Gain on business-related divestiture to Other to conform with Schwab’s financial statement line item presentation.

3q)

Reclassification of Employee compensation and benefits to Compensation and benefits to conform with Schwab’s financial statement line item presentation.

3r)

Reclassification of Clearing and execution costs to Regulatory fees and assessments and Other to conform with Schwab’s financial statement line item presentation.

3s)

Reclassification of Occupancy and equipment costs to Occupancy and equipment to conform with Schwab’s financial statement line item presentation.

3t)

Reclassification of Advertising to Advertising and market development to conform with Schwab’s financial statement line item presentation.

3u)

Reclassification of Other to Regulatory fees and assessments to conform with Schwab’s financial statement line item presentation.

3v)

Reclassification of Provision for income taxes to Taxes on income to conform with Schwab’s financial statement line item presentation.

4. Calculation of Estimated Purchase Price and Preliminary Purchase Price Allocation

The calculation of the Purchase Price and allocation to assets acquired and liabilities assumed is preliminary because the merger has not yet been completed. The preliminary allocation to assets and liabilities is based on estimates, assumptions, valuations, and other studies which have not progressed to a stage where there is sufficient information to make a definitive calculation. Accordingly, the Purchase Price allocation reflected in the unaudited pro forma adjustments will remain preliminary until Schwab management determines the final Purchase Price and the fair values of assets acquired and liabilities assumed. The final determination of the Purchase Price and related allocation is anticipated to be completed as soon as practicable after the completion of the merger and will be based on the value of Schwab’s stock price at the closing of the merger.



 

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The fair value of the Purchase Price to be transferred upon completion of the merger will include the fair value of Schwab’s common stock to be issued to TD Ameritrade stockholders pursuant to the merger agreement and the fair value of the replaced TD Ameritrade equity awards attributable to pre-combination services. The preliminary Purchase Price is calculated as follows:

Purchase Price Calculation

 

(In Millions, Except Share and Per Share Amounts)

      

TD Ameritrade common shares outstanding that will receive Schwab shares per the merger agreement

     540,640,915  

Settlement of fully vested TD Ameritrade RSUs due to change-in-control provisions

     320,999  
  

 

 

 

Total TD Ameritrade common stock outstanding

     540,961,914  
  

 

 

 

Exchange ratio per the merger agreement

     1.0837  
  

 

 

 

Total common stock to be issued by Schwab

     586,240,426  
  

 

 

 

Total voting common stock to be issued by Schwab

     517,829,531  

Total nonvoting common stock to be issued by Schwab

     68,410,895  

Stock price as of March 3, 2020

     38.30  
  

 

 

 

Preliminary fair value of consideration for TD Ameritrade outstanding common stock

   $ 22,453  
  

 

 

 

Fair value of the replaced TD Ameritrade equity awards attributable to pre-combination services

     66  
  

 

 

 

Total estimated Purchase Price (1)

   $ 22,519  
  

 

 

 

 

(1) 

As the amount of the fractional shares is not expected to be material, Schwab assumes the Purchase Price is fully settled in Schwab shares for the purpose of preparing the Pro Forma Financial Statements.

Purchase Price Sensitivity

The final Purchase Price could significantly differ from the amounts presented in the unaudited pro forma condensed combined financial information due to movements in the price of Schwab’s common stock prior to the closing date of the merger. A sensitivity analysis related to the fluctuation in the price of Schwab’s common stock was performed to assess the impact a hypothetical change of 10% on the trading price of Schwab common stock on the NYSE on March 3, 2020 would have on the estimated Purchase Price and goodwill as of the closing date of the merger.

 

Change in Price per Share of Schwab Common Stock

  Price per Share of
Schwab Common Stock
     Estimated
Purchase Price
     Estimated Goodwill  
    (In Millions, Except Per Share Amounts)  

Increase of 10%

  $ 42.13      $ 24,770      $ 12,989  

Decrease of 10%

  $ 34.47      $ 20,267      $ 8,486  

Preliminary fair value estimate of assets acquired and liabilities assumed

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of TD Ameritrade are recorded at the merger date fair values, except for certain balances related to leases, share-based payments, and income taxes for which an exception from fair value accounting applies. Schwab has prepared preliminary estimates of the fair value of identified intangible assets, tangible assets and certain financial assets



 

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and financial liabilities as described in Note 5. Assumed long-term debt, which consists of publicly traded senior notes, is measured at its estimated fair value. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the merger. The allocation is dependent upon certain valuation and other studies that have not yet been finalized. Accordingly, the pro forma Purchase Price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed, and such differences could be material.

The following table sets forth a preliminary allocation of the Purchase Price to the identifiable tangible and intangible assets acquired and liabilities assumed of TD Ameritrade using TD Ameritrade’s unaudited condensed consolidated balance sheet (after reclassification) as of December 31, 2019, with the excess recorded to goodwill:

 

Based on TD Ameritrade Historical (after reclassification)

(In Millions)

   As of
December 31, 2019
 

Fair value of assets acquired:

  

Cash and cash equivalents

   $ 2,551  

Cash and investments segregated and on deposit for regulatory purposes

     8,536  

Receivables from brokerage clients—net

     21,187  

Available for sale securities

     1,636  

Acquired intangible assets—net

     11,090  

Equipment, office facilities, and property—net

     802  

Other assets

     3,314  
  

 

 

 

Amount attributable to assets acquired

   $ 49,116  
  

 

 

 

Fair value of liabilities assumed:

  

Payables to brokerage clients

   $ 27,351  

Accrued expenses and other liabilities

     6,316  

Long-term debt

     3,668  
  

 

 

 

Amount attributable to liabilities assumed

   $ 37,335  
  

 

 

 

Fair value of net assets acquired

   $ 11,781  

Goodwill as of December 31, 2019

     10,738  
  

 

 

 

Total Estimated Purchase Price

   $ 22,519  
  

 

 

 

Goodwill represents the excess of the preliminary Purchase Price over the preliminary fair value of the underlying tangible and intangible assets acquired and liabilities assumed. Among the factors that contributed to a Purchase Price in excess of the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed are the skill sets, operations, and synergies that can be leveraged to enable the combined company to build a stronger enterprise. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur a charge to earnings for the amount of the impairment during the period in which the determination is made. Goodwill recorded in the merger is not expected to be deductible for tax purposes.

The pro forma historical net assets adjustments as shown above are further described below in Notes 5 and 6.

Equipment, office facilities, and property—net and Acquired intangible assets—net

The estimated fair values of personal property, real property, and construction in progress were determined using a sales comparison and cost approach, including consideration of functional and economic obsolescence.



 

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Schwab estimated the weighted-average useful lives of the assets based on the current condition and expected future use of the assets.

The preliminary fair values of customer relationships, existing technology, and trade names were determined based on the provisions of ASC 805, which defines fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, which is referred to in this joint proxy statement/prospectus as ASC 820. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. The fair value of the customer relationships was estimated using a multi-period excess earnings approach and the fair value of existing technology and trade names was estimated using a relief from royalty approach.

The following table summarizes the major classes of tangible and intangible assets and their respective weighted-average estimated useful lives:

 

(In Millions)

   Estimated Fair
Value
     Weighted-Average
Estimated Useful
Life (Years)
 

Equipment, office facilities, and property

     

Personal property

   $ 337        6  

Real property

     405        40  

Construction in progress

     60        N/A  
  

 

 

    

Total

   $ 802     
  

 

 

    

Intangible assets

     

Customer relationships

   $ 10,900        18  

Existing technology

     150        2  

Trade names

     40        2  
  

 

 

    

Total

   $ 11,090     
  

 

 

    

5. Pro Forma Balance Sheet Adjustments

The following unaudited pro forma adjustments result from accounting for the merger, including the determination of the fair value of the assets, liabilities, and commitments which Schwab, as the acquirer for accounting purposes, will acquire and assume from TD Ameritrade.

Adjustments included in the “Pro Forma Adjustments” column in the accompanying Pro Forma Balance Sheet as of December 31, 2019 are as follows:

 

    

Ref.

  

Acquisition Adjustments (In Millions)

   Increase
(decrease) as of
December 31,
2019
 

Assets

 

   (5a)    Adjustments to Equipment, office facilities, and property—net:   
      To eliminate TD Ameritrade’s historical property and equipment (1)    $ (895
      To record the fair value of TD Ameritrade’s real property, personal property and construction in progress      802  
        

 

 

 
           (93
        

 

 

 


 

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Ref.

  

Acquisition Adjustments (In Millions)

   Increase
(decrease) as of
December 31,
2019
 
   (5b)    Adjustments to Acquired intangible assets—net:   
      To eliminate TD Ameritrade’s historical intangible assets      (1,174
      To record the fair value of customer relationships, existing technology and trade names acquired      11,090  
        

 

 

 
           9,916  
        

 

 

 
   (5c)    Adjustments to Goodwill:   
      To eliminate TD Ameritrade’s historical goodwill      (4,227
      To record goodwill associated with the merger      10,738  
        

 

 

 
           6,511  
        

 

 

 
   (5d)    Adjustments to Other assets:   
      To eliminate TD Ameritrade’s historical right-of-use lease assets      (342
      To eliminate TD Ameritrade’s historical capitalized contract costs that are now included in the fair value of the customer relationships intangible asset      (25
      To record the amount of TD Ameritrade’s right-of-use lease assets equal to the amount of the assumed operating lease liabilities in Note (5e), adjusted for off-market terms      396  
      To record income tax receivables associated with the deductible portion of transaction costs to be incurred in the merger      14  
        

 

 

 
           43  
        

 

 

 
      Total adjustments to assets    $ 16,377  
        

 

 

 

Liabilities

 

   (5e)    Adjustments to Accrued expenses and other liabilities:   
      To record estimated transaction costs to be paid by Schwab    $ 26  
      To record estimated transaction costs to be paid by TD Ameritrade      90  
      To eliminate TD Ameritrade’s historical operating lease liabilities      (375
      To record TD Ameritrade’s operating lease liabilities to the present value of the remaining lease payments using Schwab’s incremental borrowing rate      410  
        

 

 

 
           151  
        

 

 

 
   (5f)    Adjustments to deferred tax liabilities included in Accrued expenses and other liabilities:   
      To record tax liabilities associated with the fair value adjustment of TD Ameritrade’s intangible assets      2,371  
      To record tax liabilities associated with the fair value adjustment of TD Ameritrade’s property and equipment      13  
      To record tax assets associated with the fair value adjustment of TD Ameritrade’s long-term debt      (27
      To record tax liabilities associated with the adjustment of TD Ameritrade’s right-of-use lease assets      14  
      To record tax assets associated with the adjustment of TD Ameritrade’s operating lease liabilities      (8
        

 

 

 
           2,363  
        

 

 

 


 

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Ref.

  

Acquisition Adjustments (In Millions)

   Increase
(decrease) as of
December 31,
2019
 
   (5g)    Adjustments to Long-term debt:   
      To eliminate TD Ameritrade’s historical long-term debt      (3,555
      To record the fair value of TD Ameritrade’s long-term debt      3,668  
        

 

 

 
           113  
        

 

 

 
      Total adjustments to liabilities    $ 2,627  
        

 

 

 

Stockholders’ equity

 

   (5h)    Adjustments to Common stock:   
      To eliminate the par value of TD Ameritrade’s Common stock    $ (7
      To record the par value of Schwab common stock issued in the merger      5  
        

 

 

 
           (2
        

 

 

 
   (5i)    Adjustment to Common stock — nonvoting:   
      To record the par value of Schwab nonvoting common stock issued in the merger      1  
        

 

 

 
   (5j)    Adjustments to Additional paid-in capital:   
      To eliminate TD Ameritrade’s historical Additional paid-in capital      (3,459
      To record additional paid-in capital related to common stock issued in the merger      22,513  
        

 

 

 
           19,054  
        

 

 

 
   (5k)    Adjustments to Retained earnings:   
      To eliminate TD Ameritrade’s historical retained earnings      (8,790
      To record estimated transaction costs to be paid by Schwab, net of tax      (22
        

 

 

 
           (8,812
        

 

 

 
   (5l)    Adjustment to Treasury stock, at cost:   
      To eliminate TD Ameritrade’s historical Treasury stock      3,527  
        

 

 

 
   (5m)    Adjustment to Accumulated other comprehensive income:   
      To eliminate TD Ameritrade’s historical Accumulated other comprehensive income      (18
        

 

 

 
      Total adjustments to stockholders’ equity      13,750  
        

 

 

 
      Total adjustments to liabilities and stockholders’ equity    $ 16,377  
        

 

 

 

 

(1)

TD Ameritrade’s historical property and equipment included $148 million of internal systems which were incorporated into the fair value of the existing technology intangible asset.

The total costs and expenses relating to the merger are estimated to be $153 million, pre-tax, of which $37 million are included in the historical financial information for Schwab and TD Ameritrade for the year ended December 31, 2019 and an additional $116 million are expected to be incurred at close. Our estimate includes costs and expenses related to various professional fees and other costs associated with the merger such as advisory, legal, accounting, tax, and printing fees. The estimate involves a degree of judgment which Schwab management believes to be reasonable as of the date of this joint proxy statement/prospectus. There can be no assurance that these estimates will not change, even materially, as the transaction progresses to the closing date of the merger. These transaction related costs are one-time in nature and are not expected to have a continuing impact on Schwab’s ongoing results of operations. Thus, while they are accrued on the Pro Forma Balance Sheet, they are not reflected in the Pro Forma Statement of Income.



 

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6. Pro Forma Statement of Income Adjustments

Adjustments included in the “Pro Forma Adjustments” column in the accompanying Pro Forma Statement of Income are as follows:

 

   

Ref.

  

Acquisition Adjustments (In Millions)

   Increase
(decrease) as of
December 31,
2019
 

Net revenues

 

 

(6a)

   To adjust Interest revenue for amortization of the premium resulting from the new amortized cost basis of TD Ameritrade’s investments available-for-sale    $ (5)  
  (6b)    To amortize the fair value adjustments of long-term debt      21  
  (6c)    To eliminate the realized loss amortized to net income for prior cash flow hedging instruments      4  
  (6d)    To reflect the increase in Bank deposit account fees related to the insured deposit account agreement (1)      106  
       

 

 

 
     Total adjustments to net revenues    $ 126  
       

 

 

 

Expenses excluding interest

 

  (6e)    To eliminate TD Ameritrade’s historical amortization of capitalized contract costs    $ (9)  
  (6f)    To reverse transaction costs incurred by Schwab in connection with the merger      (12)  
     To reverse transaction costs incurred by TD Ameritrade in connection with the merger      (25)  
       

 

 

 
          (37)  
       

 

 

 
  (6g)    To adjust Occupancy and equipment for the impact of the right-of-use lease assets and operating lease liabilities recognized in Notes (5d) and (5e)      (3)  
       

 

 

 
  (6h)    To adjust Depreciation and amortization:   
     To eliminate TD Ameritrade’s historical depreciation and amortization      (155)  
     To record depreciation of TD Ameritrade’s real property      10  
     To record depreciation of TD Ameritrade’s personal property      56  
       

 

 

 
          (89)  
       

 

 

 
  (6i)    To adjust Amortization of acquired intangible assets:   
     To eliminate TD Ameritrade’s historical amortization of acquired intangible assets      (124)  
     To record amortization of TD Ameritrade’s intangible assets      701  
       

 

 

 
          577  
       

 

 

 
     Total adjustments to expenses excluding interest      439  
       

 

 

 
  (6j)    To reflect the income tax impact of the unaudited pro forma adjustments using the blended U.S. federal and state statutory tax rate      (77)  
       

 

 

 
     Total adjustments to net income    $ (236)  
       

 

 

 

 

(1) 

Schwab and the depository institutions executed the insured deposit account agreement (as defined in this joint proxy statement/prospectus) in connection with the merger agreement. The insured deposit account agreement replaces the existing insured deposit account agreement (as defined in this joint proxy statement/prospectus) between the depository institutions and TD Ameritrade upon the close of the merger. As the revenue impact of the insured deposit account agreement is a factually supportable item directly attributable



 

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  to the merger that is expected to have a continuing impact on the combined results of operations, it has been incorporated as a pro forma adjustment.

7. Earnings Per Share

The preliminary pro forma basic earnings per common share is computed by dividing combined pro forma net income attributable to Schwab common stock by pro forma weighted-average common shares outstanding. The pro forma weighted-average common shares outstanding is based on Schwab’s historical weighted-average common shares adjusted for the issuance of 586 million shares of common stock to the TD Ameritrade stockholders (refer to Note 4), assuming the merger occurred on January 1, 2019. Of the 586 million shares of common stock, 518 million shares were voting common stock and 68 million shares were nonvoting common stock. The preliminary pro forma diluted earnings per share calculation is similar to the computation of the pro forma basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Dilutive potential common shares include, if dilutive, the effect of outstanding stock options and non-vested restricted stock units of Schwab, as well as the common shares that have dilutive effect resulting from the replacement of TD Ameritrade’s employee equity awards, assuming the merger occurred on January 1, 2019. As the participation rights, including dividend and liquidation rights, are identical between the voting common stock and nonvoting common stock classes, basic and diluted earnings per share are the same for each class. Accordingly, the basic and diluted earnings per common share were not separately disclosed for each class in the Pro Forma Statement of Income.

 

(In Millions, Except Per Share Amounts)

   Year Ended
December 31, 2019
 

Basic EPS

  

Combined pro forma net income attributable to Schwab common stockholders

   $ 5,273  

Schwab historical weighted-average number of basic shares

     1,311  

Total common stock to be issued by Schwab

     586  
  

 

 

 

Pro forma weighted-average common shares outstanding

     1,897  
  

 

 

 

Basic EPS

   $ 2.78  
  

 

 

 

Diluted EPS

  

Combined pro forma net income attributable to Schwab common stockholders

   $ 5,273  

Pro forma weighted-average common shares outstanding

     1,897  

Schwab historical weighted-average number of dilutive shares

     9  

Dilutive effect from TD Ameritrade’s employee equity awards

     2  
  

 

 

 

Pro forma diluted weighted-average common shares outstanding

     1,908  
  

 

 

 

Diluted EPS

   $ 2.76  
  

 

 

 


 

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RISK FACTORS

In addition to the other information contained or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 75 of this joint proxy statement/prospectus, TD Ameritrade stockholders should carefully consider the following risk factors in determining whether to vote for the approval and adoption of the merger agreement, and Schwab stockholders should carefully consider the following risk factors in deciding whether to vote for the approval of the share issuance and the Schwab charter amendment. You should also read and consider the risk factors associated with each of the businesses of Schwab and TD Ameritrade because these risk factors may affect the operations and financial results of the combined company. These risk factors may be found under Part I, Item 1A, “Risk Factors” in the Schwab 2019 10-K and the TD Ameritrade 2019 10-K, and in Schwab’s and TD Ameritrade’s subsequent filings with the SEC, which are incorporated by reference into this joint proxy statement/prospectus.

Because the exchange ratio is fixed and the market price of Schwab common stock has fluctuated and will continue to fluctuate, TD Ameritrade stockholders cannot be sure at the time they vote on the merger of the value of the merger consideration they will receive upon completion of the merger or the value of the TD Ameritrade common stock they will give up.

Upon completion of the merger, each share of TD Ameritrade common stock outstanding immediately prior to the merger (except for shares of TD Ameritrade common stock held by TD Ameritrade as treasury stock or by Schwab (other than any fiduciary shares) which will be cancelled without payment) will automatically be converted into the right to receive 1.0837 shares of Schwab common stock, except that TD Bank and its affiliates will receive Schwab common stock only up to a maximum of the voting limitation percentage of the Schwab common stock (including any other shares of Schwab common stock then owned by TD Bank and its affiliates) and will otherwise receive shares of Schwab nonvoting common stock. Because the exchange ratio is fixed, the value of the merger consideration will depend on the market price of Schwab common stock at the time the merger is completed. The value of the merger consideration has fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the TD Ameritrade special meeting and the date the merger is completed and thereafter. The closing price per share of TD Ameritrade common stock as of November 20, 2019, the last trading day prior to the publication of media reports regarding the merger, and as of November 22, 2019, the last trading day prior to public announcement of the merger by Schwab and TD Ameritrade, was $41.38 and $48.13, respectively, and the closing price per share has fluctuated as high as $[●] and as low as $[●] between November 20, 2019 and [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, and has fluctuated as high as $[●] and as low as $[●] between November 22, 2019 and [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus. The closing price per share of Schwab common stock as of November 20, 2019, the last trading day prior to the publication of media reports regarding the merger, and as of November 22, 2019, the last trading day prior to public announcement of the merger by Schwab and TD Ameritrade, was $44.75 and $48.20, respectively, and the closing price per share has fluctuated as high as $[●] and as low as $[●] between November 20, 2019 and [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, and has fluctuated as high as $[●] and as low as $[●] between November 22, 2019 and [], 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus. Accordingly, at the time of the TD Ameritrade special meeting, TD Ameritrade stockholders will not know or be able to determine the market value of the merger consideration they would receive upon completion of the merger. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Schwab’s and TD Ameritrade’s respective businesses, operations and prospects, market assessments of the likelihood that the merger will be completed, the timing of the merger and regulatory considerations. Many of these factors are beyond Schwab’s and TD Ameritrade’s control.

 

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The market price of Schwab common stock after the merger may be affected by factors different from those affecting the market price of TD Ameritrade common stock currently.

Upon completion of the merger, holders of TD Ameritrade common stock will become holders of Schwab common shares. The businesses of Schwab differ from those of TD Ameritrade in important respects, and, accordingly, the results of operations of Schwab after the merger, as well as the market price of Schwab common stock, may be affected by factors different from those currently affecting the results of operations of TD Ameritrade. For further information on the businesses of Schwab and TD Ameritrade and certain factors to consider in connection with those businesses, see the documents incorporated by reference into this joint proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus.

After completion of the merger, Schwab may fail to realize the anticipated benefits and cost savings of the merger, which could adversely affect the value of Schwab common stock.

The success of the merger will depend, in significant part, on Schwab’s ability to realize the anticipated benefits and cost savings from combining the businesses of Schwab and TD Ameritrade. The ability of Schwab to realize these anticipated benefits and cost savings is subject to certain risks including:

 

   

Schwab’s ability to successfully combine the businesses of Schwab and TD Ameritrade; and

 

   

whether the combined business will perform as expected.

If Schwab is not able to successfully combine the businesses of Schwab and TD Ameritrade within the anticipated time frame, or at all, the anticipated cost savings and other benefits of the merger may not be realized fully or at all or may take longer to realize than expected, the combined business may not perform as expected and the value of the Schwab common shares (including the merger consideration) may be adversely affected.

Schwab and TD Ameritrade have operated and, until completion of the merger, will continue to operate, independently, and there can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Schwab or TD Ameritrade employees, the loss of clients, the disruption of either company’s or both companies’ ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of Schwab and TD Ameritrade in order to realize the anticipated benefits of the merger so the combined business performs as expected:

 

   

combining certain of the companies’ operations and corporate functions;

 

   

integrating the companies’ technologies;

 

   

integrating and unifying the product offerings and services available to clients;

 

   

identifying and eliminating redundant and underperforming functions and assets;

 

   

harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

 

   

maintaining existing agreements with commercial counterparties and avoiding delays in entering into new agreements with prospective commercial counterparties;

 

   

addressing possible differences in business backgrounds, corporate cultures and management philosophies;

 

   

consolidating the companies’ administrative and information technology infrastructure; and

 

   

coordinating distribution and marketing efforts.

 

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In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company.

Schwab and TD Ameritrade may have difficulty attracting, motivating and retaining executives and other employees in light of the merger.

Uncertainty about the effect of the merger on Schwab and TD Ameritrade employees may impair Schwab’s and TD Ameritrade’s ability to attract, retain and motivate personnel prior to and following the merger. Employee retention may be particularly challenging during the pendency of the merger, as employees of Schwab and TD Ameritrade may experience uncertainty about their future roles with the combined business. In addition, pursuant to change-in-control provisions in their respective employment agreements or term sheets with TD Ameritrade, certain employees of TD Ameritrade are entitled to receive severance payments upon a constructive termination of employment. Such TD Ameritrade employees potentially could terminate their employment following specified circumstances set forth in their employment agreements or term sheets, including certain changes in such employees’ position, compensation or benefits and collect severance. Such circumstances could occur in connection with the merger as a result of changes in roles and responsibilities. See “Interests of Certain Persons in the Merger” beginning on page 191 of this joint proxy statement/prospectus for a further discussion of some of these issues. If employees of Schwab or TD Ameritrade depart, the integration of the companies may be more difficult and the combined business following the merger may be harmed. Furthermore, Schwab may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the businesses of Schwab or TD Ameritrade, and Schwab’s ability to realize the anticipated benefits of the merger may be adversely affected. In addition, there could be disruptions to or distractions for the workforce and management associated with activities of labor unions or integrating employees into Schwab.

Completion of the merger is subject to many conditions and if these conditions are not satisfied or waived, the merger will not be completed.

The obligations of Schwab, TD Ameritrade and Merger Sub to complete the merger are subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of a number of conditions, including, among others: (i) the affirmative vote of (A) the holders of a majority of the shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting approving and adopting the merger agreement and (B) the holders (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) of a majority of the shares of TD Ameritrade common stock (other than shares of TD Ameritrade common stock held by TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) outstanding and entitled to vote at the TD Ameritrade special meeting approving and adopting the merger agreement (which condition described in this clause (i) may not be waived), (ii) the affirmative vote of (A) the holders of a majority of shares of Schwab common stock present in person or by proxy at the Schwab special meeting approving the share issuance (which meets or exceeds the minimum requirement under the rules of the NYSE of the affirmative vote of a majority of the votes cast by holders of shares of Schwab common stock) and (B) the holders of a majority of shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting approving the Schwab charter amendment, (iii) both (A) the expiration or termination of any applicable waiting period, or any extension thereof, under the HSR Act and (B) certain governmental authorizations having been made or obtained, as applicable, and being in full force and effect, (iv) receipt of the noncontrol determinations from the Federal Reserve Board, (v) absence of any applicable law, order or injunction that prohibits completion of the merger, (vi) approval for the listing on the NYSE of the shares of Schwab common stock to be issued in the merger, subject only to official notice of issuance, (vii) accuracy of the representations and warranties made in the merger agreement by, in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab, in each case, as of the date of the merger agreement and as of the date of completion of the merger, subject to certain materiality thresholds, (viii) performance in all material respects by,

 

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in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab and Merger Sub of the material obligations required to be performed by it at or prior to completion of the merger, and (ix) the absence since the date of the merger agreement of a material adverse effect on, in the case of Schwab and Merger Sub’s obligations to complete the merger, TD Ameritrade and, in the case of TD Ameritrade’s obligation to complete the merger, Schwab (see “The Merger Agreement—Definition of ‘Material Adverse Effect’” beginning on page 159 of this joint proxy statement/prospectus for the definition of material adverse effect). In certain cases, Schwab and Merger Sub’s obligations to complete the merger are further subject to the relevant governmental approvals having been received without the imposition of, and there being no applicable law imposing, a burdensome condition (see “The Merger Agreement—Reasonable Best Efforts Covenant” beginning on page 167 of this joint proxy statement/prospectus for the definition of burdensome condition). For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 156 of this joint proxy statement/prospectus. There can be no assurance that the conditions to the closing of the merger will be satisfied or waived or that the merger will be completed. See “—Failure to complete the merger could negatively impact the stock price and the future business and financial results of Schwab and TD Ameritrade,” below. 

In order to complete the merger, Schwab and TD Ameritrade must make certain governmental filings and obtain certain governmental authorizations, and if such filings and authorizations are not made or granted or are granted with conditions to the parties, the closing of the merger may be jeopardized or the anticipated benefits of the merger could be reduced.

The closing of the merger is conditioned upon the expiration or termination of any applicable waiting period, or any extension thereof, under the HSR Act and the required governmental authorizations, including the noncontrol determinations. Concurrently with the execution and delivery of the merger agreement, Schwab, TD Ameritrade and TD Bank entered into a separate letter agreement, which is referred to in this joint proxy statement/prospectus as the letter agreement, pursuant to which TD Bank has agreed to modify (i) its post-merger voting rights and governance arrangements as contemplated by the merger agreement and/or the stockholder agreement (as defined in this joint proxy statement/prospectus) and/or (ii) the terms of the insured deposit account agreement (as defined in this joint proxy statement/prospectus), in each case, to the extent necessary to obtain the foregoing determinations by the Federal Reserve Board; provided, that TD Bank will not be required to take any action which would result in a loss of its ability to account for its ownership of Schwab common shares to be issued to it in the merger on an equity accounting basis. Although Schwab and TD Ameritrade have agreed in the merger agreement to use their reasonable best efforts, subject to certain limitations, to make certain governmental filings or obtain the required governmental authorizations, as the case may be, there can be no assurance that the relevant waiting periods will expire or that the relevant authorizations will be obtained. In addition, the governmental authorities with or from which these authorizations are required have broad discretion in administering the governing regulations. As a condition to authorization of the merger, these governmental authorities may impose requirements, limitations or costs or place restrictions on the conduct of Schwab’s business after completion of the merger. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying the closing of the merger or imposing additional material costs on or materially limiting the revenues of the combined company following the merger, or otherwise adversely affecting Schwab’s businesses and results of operations after completion of the merger. In addition, there can be no assurance that these terms, obligations or restrictions will not result in the delay or abandonment of the merger. See “The Merger Agreement—Conditions to Completion of the Merger” and “The Merger Agreement—Reasonable Best Efforts Covenant” beginning on pages 156 and 167, respectively, of this joint proxy statement/prospectus. Additionally, pursuant to the letter agreement, Schwab and TD Ameritrade have agreed with TD Bank that they will not (i) waive certain conditions to the closing of the merger that would adversely affect TD Bank or (ii) complete the merger unless certain conditions (primarily related to the noncontrol determinations and other regulatory approvals required by TD Bank) are satisfied. Failure to satisfy these conditions could result in a delay or abandonment of the merger. See “The Letter Agreement” beginning on page 189 of this joint proxy statement/prospectus.

 

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Schwab’s and TD Ameritrade’s business relationships may be subject to disruption due to uncertainty associated with the merger.

Parties with which Schwab or TD Ameritrade does business may experience uncertainty associated with the merger, including with respect to current or future business relationships with Schwab, TD Ameritrade or the combined business. Schwab’s and TD Ameritrade’s business relationships may be subject to disruption as parties with which Schwab or TD Ameritrade does business may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Schwab, TD Ameritrade or the combined business. These disruptions could have an adverse effect on the businesses, financial condition, results of operations or prospects of the combined business, including an adverse effect on Schwab’s ability to realize the anticipated benefits of the merger. The risk, and adverse effect, of such disruptions could be exacerbated by a delay in completion of the merger or termination of the merger agreement.

Certain of TD Ameritrade’s executive officers and directors have interests in the merger that may be different from your interests as a stockholder of TD Ameritrade or as a stockholder of Schwab.

In considering the recommendation of the TD Ameritrade board of directors to vote for the approval and adoption of the merger agreement, TD Ameritrade stockholders should be aware that the directors and executive officers of TD Ameritrade may have interests in the merger that are different from, or in addition to, the interests of TD Ameritrade stockholders generally, including potential accelerated vesting of equity awards and severance payments and certain arrangements and agreements with Schwab. The strategic development committee was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement and in making its recommendation to the TD Ameritrade board of directors that it approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger. The TD Ameritrade board of directors was also aware of these interests and considered them, among other matters, in evaluating the merger agreement and approving the merger, and in making its recommendation that TD Ameritrade stockholders vote to approve and adopt the merger agreement.

For more information, see “The Merger—Interests of TD Ameritrade’s Directors and Executive Officers in the Merger” beginning on page 191 of this joint proxy statement/prospectus.

The merger agreement limits Schwab’s and TD Ameritrade’s ability to pursue alternatives to the merger and may discourage other companies from trying to acquire TD Ameritrade for greater consideration than what Schwab has agreed to pay or acquire Schwab in a transaction that is more favorable to Schwab than the merger.

The merger agreement contains provisions that make it more difficult for TD Ameritrade to sell its business to a party other than Schwab. These provisions include a general prohibition on TD Ameritrade soliciting any acquisition proposal or offer for a competing transaction. Further, subject to certain exceptions, the TD Ameritrade board of directors will not withdraw or modify in a manner adverse to Schwab the recommendation of the TD Ameritrade board of directors in favor of the approval and adoption of the merger agreement, and Schwab generally has a right to match any competing acquisition proposals that may be made. Notwithstanding the foregoing, at any time prior to the approval and adoption of the merger agreement by TD Ameritrade stockholders, the TD Ameritrade board of directors is permitted to withdraw or modify in a manner adverse to Schwab the recommendation of the TD Ameritrade board of directors in favor of the approval and adoption of the merger agreement in certain circumstances if it determines in good faith that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties to TD Ameritrade stockholders under applicable law. The merger agreement requires that TD Ameritrade submit the approval and adoption of the merger agreement to a vote of TD Ameritrade stockholders even if the TD Ameritrade board of directors changes its recommendation in favor of the approval and adoption of the merger agreement in a manner adverse to Schwab. See “The Merger Agreement—No Solicitation” beginning on page 164 of this joint proxy statement/prospectus.

 

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The merger agreement also contains provisions that make it more difficult for Schwab to sell its business. These provisions include a general prohibition on Schwab soliciting any acquisition proposal or offer for a competing transaction. Further, subject to certain exceptions, the Schwab board of directors will not withdraw or modify in a manner adverse to TD Ameritrade the recommendation of the Schwab board of directors in favor of the share issuance and the Schwab charter amendment, and TD Ameritrade generally has a right to renegotiate the merger agreement. Notwithstanding the foregoing, at any time prior to the approval of the share issuance and Schwab charter amendment by Schwab stockholders, the Schwab board of directors is permitted to withdraw or modify in a manner adverse to TD Ameritrade the recommendation of the Schwab board of directors in favor of the share issuance and Schwab charter amendment in certain circumstances if it determines in good faith that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties to Schwab stockholders under applicable law. The merger agreement requires that Schwab submit the share issuance and Schwab charter amendment to a vote of Schwab stockholders even if the Schwab board of directors changes its recommendation in favor of the share issuance and Schwab charter amendment in a manner adverse to TD Ameritrade. See “The Merger Agreement—No Solicitation” beginning on page 164 of this joint proxy statement/prospectus.

While both TD Ameritrade and Schwab believe these provisions and agreements are reasonable and customary and are not preclusive of other offers, the provisions might discourage a third party that has an interest in acquiring all or a significant part of TD Ameritrade or Schwab from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher per-share value than the merger consideration, in the case of TD Ameritrade, or that is more favorable to Schwab than completion of the merger, in the case of Schwab.

Failure to complete the merger could negatively impact the stock price and the future business and financial results of Schwab and TD Ameritrade.

If the merger is not completed for any reason, including as a result of Schwab stockholders or TD Ameritrade stockholders failing to approve the necessary proposals, the ongoing businesses of Schwab and TD Ameritrade may be adversely affected and, without realizing any of the benefits of having completed the merger, Schwab and TD Ameritrade would be subject to a number of risks, including the following:

 

   

Schwab and TD Ameritrade may experience negative reactions from the financial markets, including negative impacts on their respective stock prices;

 

   

Schwab and TD Ameritrade may experience negative reactions from their respective clients, regulators and employees;

 

   

Schwab and TD Ameritrade will be required to pay certain costs relating to the merger, whether or not the merger is completed;

 

   

the merger agreement places certain restrictions on the conduct of Schwab’s and TD Ameritrade’s businesses prior to completion of the merger. Such restrictions, the waiver of which is subject to the consent of the other party (in certain cases, not to be unreasonably withheld, conditioned or delayed), may prevent TD Ameritrade and Schwab from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the merger (see “The Merger Agreement—Conduct of Business Pending the Merger” beginning on page 159 of this joint proxy statement/prospectus for a description of the restrictive covenants applicable to TD Ameritrade and Schwab); and

 

   

matters relating to the merger (including integration planning) will require substantial commitments of time and resources by Schwab and TD Ameritrade management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either Schwab or TD Ameritrade as an independent company.

If the merger is not completed, the risks described above may materialize and they may adversely affect Schwab’s and TD Ameritrade’s businesses, financial condition, financial results and stock prices.

 

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In the event of a termination of the merger agreement under certain circumstances, Schwab or TD Ameritrade may be required to pay a termination fee of $950 million to the other party. In addition, if Schwab or TD Ameritrade does not obtain the required vote of the Schwab stockholders at the Schwab special meeting or the TD Ameritrade stockholders at the TD Ameritrade special meeting, as applicable, and the merger agreement is terminated in certain circumstances, that party would be required to reimburse the other party for its out-of-pocket fees and expenses actually incurred or accrued in connection with or related to the transactions contemplated by the merger agreement, up to an aggregate amount of $50 million. If the termination fee is also payable by such party, the expense reimbursement payment will be credited against the termination fee.

In addition, Schwab and TD Ameritrade could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Schwab or TD Ameritrade to perform their respective obligations under the merger agreement. If the merger is not completed, these risks may materialize and may adversely affect Schwab’s and TD Ameritrade’s businesses, financial condition, financial results and stock prices.

The Schwab common shares to be received by TD Ameritrade stockholders upon completion of the merger will have different rights from shares of TD Ameritrade common stock.

Upon completion of the merger, TD Ameritrade stockholders will no longer be stockholders of TD Ameritrade but will instead become stockholders of Schwab. TD Ameritrade stockholders’ rights as stockholders will continue to be governed by Delaware law but the terms of the Schwab charter and the Schwab bylaws are in some respects materially different than the terms of TD Ameritrade’s charter and TD Ameritrade’s by-laws, which currently govern the rights of TD Ameritrade stockholders. See “Comparison of Stockholder Rights” beginning on page 212 of this joint proxy statement/prospectus for a discussion of the different rights associated with Schwab common shares.

After the merger, TD Ameritrade stockholders will have a significantly lower ownership and voting interest in Schwab than they currently have in TD Ameritrade and will exercise less influence over management.

Based on the number of shares of TD Ameritrade common stock outstanding as of [], 2020, and the number of shares of Schwab common stock outstanding as of [], 2020, it is expected that, immediately after completion of the merger, former TD Ameritrade stockholders will own approximately [●]% of the outstanding Schwab common shares (including Schwab common stock and Schwab nonvoting common stock). Consequently, former TD Ameritrade stockholders will have less influence over the management and policies of Schwab than they currently have over the management and policies of TD Ameritrade.

Lawsuits may be filed against TD Ameritrade and Schwab challenging the merger. An adverse ruling in any such lawsuit may prevent the merger from being completed.

One of the conditions to completion of the merger is the absence of any applicable law (including any order) being in effect that prohibits completion of the merger. Accordingly, if litigation is filed challenging the merger and a plaintiff is successful in obtaining an order enjoining completion of the merger, then such order may prevent the merger from being completed, or from being completed within the expected time frame.

Schwab and TD Ameritrade will incur significant transaction and merger-related costs in connection with the merger.

Schwab and TD Ameritrade expect to incur a number of non-recurring costs associated with the merger and combining the operations of the two companies. The significant, non-recurring costs associated with the merger include, among others, fees and expenses of financial advisors (which are described under “Opinions of the Strategic Development Committee’s Financial Advisors” and “Opinion of Schwab’s Financial Advisor”

 

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beginning on pages 118 and 132 of this joint proxy statement/prospectus, respectively) and other advisors and representatives, certain employment-related costs relating to employees of TD Ameritrade (which are described under “Interests of Certain Persons in the Merger” beginning on page 191 of this joint proxy statement/prospectus), filing fees due in connection with filings required under the HSR Act and filing fees and printing and mailing costs for this joint proxy statement/prospectus. Some of these costs have already been incurred or may be incurred regardless of whether the merger is completed, including a portion of the fees and expenses of financial advisors and other advisors and representatives and filing fees for this joint proxy statement/prospectus. Schwab also will incur transaction fees and costs related to formulating and implementing integration plans with respect to the two companies, including facilities and systems consolidation costs. Schwab continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses. Although Schwab expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Schwab to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

The merger may not be accretive to Schwab’s earnings per share, which may negatively affect the market price of Schwab common stock following completion of the merger.

In connection with the completion of the merger, Schwab expects to issue approximately [●] Schwab common shares. The issuance of new Schwab common shares could have the effect of depressing the market price of Schwab common shares.

Based on the anticipated synergies between Schwab and TD Ameritrade, the merger is expected to be accretive to Schwab’s earnings per share in the third year following completion of the merger.

However, future events and conditions could reduce or delay the accretion that is currently projected or result in the merger being dilutive to Schwab’s earnings per share, including adverse changes in market conditions, additional transaction and integration related costs and other factors such as the failure to realize some or all of the benefits anticipated in the merger. Any dilution of, reduction in or delay of any accretion to, Schwab’s earnings per share could cause the price of shares of Schwab common stock to decline or grow at a reduced rate.

The Schwab unaudited pro forma condensed combined financial statements included in this joint proxy statement/prospectus are preliminary and the actual financial condition and results of operations after the merger may differ materially.

The Schwab unaudited pro forma condensed combined financial statements in this joint proxy statement/prospectus are presented for illustrative purposes only and are not necessarily indicative of what Schwab’s actual financial condition or results or operations would have been had the merger been completed on the dates indicated. The Schwab unaudited pro forma condensed combined financial statements reflect adjustments, which are based upon preliminary estimates, to record the TD Ameritrade identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Schwab’s financial condition or results of operations following the transaction. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, see “Schwab Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 48 of this joint proxy statement/prospectus.

The merger may not qualify as a tax-free reorganization for U.S. federal income tax purposes if certain conditions, some of which are outside of the control of Schwab and TD Ameritrade, are not met.

The qualification of the merger as a tax-free reorganization for U.S. federal income tax purposes depends on numerous facts and circumstances, some of which are not known as of the date of this joint proxy statement/

 

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prospectus and/or are outside of the parties’ control. Each of Schwab and TD Ameritrade has agreed to use its reasonable best efforts (i) to cause the merger to qualify as a reorganization for U.S. federal income tax purposes and (ii) not to, and not to permit or cause any of its subsidiaries or affiliates to, take or cause to be taken any action reasonably likely to cause the merger to fail to qualify as a reorganization for U.S. federal income tax purposes. However, there can be no assurance that the merger will qualify as a reorganization for U.S. federal income tax purposes. The receipt of an opinion from counsel on the qualification of the merger as a reorganization for U.S. federal income tax purposes is not a condition to either party’s obligation to complete the merger, and Schwab and TD Ameritrade have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger. Even if Schwab and TD Ameritrade report the merger as qualifying as a reorganization, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to the position taken by Schwab and TD Ameritrade. Among other requirements, the merger will qualify as a tax-free reorganization only if at least 80% of TD Ameritrade’s issued and outstanding stock is exchanged for Schwab voting stock in the merger, which is referred to in this joint proxy statement/prospectus as the 80% voting stock consideration requirement. As described above under “Summary—What TD Ameritrade Stockholders Will Receive in the Merger,” shares of TD Ameritrade common stock held by TD Bank will be exchanged at completion of the merger for Schwab nonvoting common stock in lieu of Schwab common stock to the extent exchanging those shares for Schwab common stock would otherwise result in TD Bank and its affiliates owning more than 9.9% of the issued and outstanding Schwab common stock immediately following the effective time of the merger (or such lower percentage as permitted by the Federal Reserve Board). As of the date of this joint proxy statement/prospectus, we expect that the Federal Reserve Board will not reduce the voting limitation percentage below 9.9% and, assuming this is the case, based on the percentages of TD Ameritrade common stock and Schwab common stock owned by TD Bank and its affiliates as of the date of this joint proxy statement/prospectus, we expect that the 80% voting stock consideration requirement will be met. However, there can be no assurances in this regard. If the 80% voting stock consideration requirement is not met (or one or more of the other requirements for qualification as a tax-free reorganization are not met) and the merger is completed, the receipt of Schwab common stock in exchange for TD Ameritrade common stock in the merger will be a taxable transaction to U.S. holders of TD Ameritrade common stock. Neither Schwab nor TD Ameritrade, nor their respective subsidiaries, will have any liability or obligation to holders of shares of TD Ameritrade common stock as a result of the merger failing to qualify as a tax-free reorganization. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the potential tax consequences of the merger to you.

Risks relating to Schwab and TD Ameritrade.

Schwab and TD Ameritrade are, and following completion of the merger Schwab will continue to be, subject to the risks described in (i) Part I, Item 1A in the Schwab 2019 10-K, (ii) Part I, Item 1A in the TD Ameritrade 2019 10-K and (iii) Schwab’s and TD Ameritrade’s subsequent filings with the SEC. See “Where You Can Find More Information” beginning on page 231 of this joint proxy statement/prospectus.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, including the information included or incorporated by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, Forward-looking statements include statements that refer to expectations, projections, or other characterizations of future events or circumstances and are identified by words such as “believe,” “anticipate,” “expect,” “estimate,” “assume,” “intend,” “plan,” “forecast,” “predict,” “project,” “will,” “may,” “aim,” “target,” “could,” “should,” “continue,” “build,” “improve,” “growth,” “increase,” “potential,” “strategy,” “objective,” and other similar expressions. These forward-looking statements include, but are not limited to, statements about the anticipated benefits of the merger between Schwab and TD Ameritrade, including future financial and operating results and performance; statements about Schwab’s and TD Ameritrade’s and the combined company’s plans, objectives, expectations and intentions with respect to future operations, products and services; financial projections; the amount and timing of synergies from the merger; and expected timing of completion of the merger.

These forward-looking statements, which reflect Schwab’s and TD Ameritrade’s management’s beliefs, objectives and expectations as of the date of this joint proxy statement/prospectus, or in the case of any information included or incorporated by reference, as of the date of those documents, are necessarily estimates. Achievement of the expressed beliefs, objectives and expectations is subject to risks and uncertainties that could cause actual results to differ materially.

Factors that may cause actual results to differ include, but are not limited to: the failure of the parties to satisfy the closing conditions in the merger agreement in a timely manner or at all, including stockholder and regulatory approvals and noncontrol determinations; disruptions to the parties’ businesses as a result of the announcement and pendency of the merger; the parties being unable to successfully implement their integration strategies; the risk that expected revenue, expense and other synergies from the merger may not be fully realized or may take longer to realize than expected; general market conditions, including the level of interest rates, equity valuations and trading activity; the parties’ ability to attract and retain clients and RIAs and grow those relationships and client assets; competitive pressures on pricing, including deposit rates; the parties’ ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance their infrastructure, in a timely and successful manner; client use of the parties’ advisory solutions and other products and services; client sensitivity to rates; the level of client assets, including cash balances; capital and liquidity needs and management; regulatory guidance; litigation or regulatory matters; and any adverse impact of financial reform legislation and related regulations.

Additional factors that could cause Schwab’s and TD Ameritrade’s results to differ materially from those described in the forward-looking statements can be found in Schwab’s and TD Ameritrade’s filings with the Securities and Exchange Commission, including the Schwab 2019 10-K and the TD Ameritrade 2019 10-K

You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the date of any information included or incorporated by reference in this joint proxy statement/prospectus. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to Schwab or TD Ameritrade or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, Schwab and TD Ameritrade undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

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THE COMPANIES

The Charles Schwab Corporation

Schwab is a savings and loan holding company, headquartered in San Francisco, California. Schwab was incorporated in the State of Delaware in 1986 and engages, through its subsidiaries, in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. At December 31, 2019, Schwab had $4.04 trillion in client assets, 12.3 million active brokerage accounts, 1.7 million corporate retirement plan participants, and 1.4 million banking accounts.

Principal business subsidiaries of Schwab include the following:

 

   

Charles Schwab & Co., Inc., incorporated in 1971, a securities broker-dealer with over 360 domestic branch offices in 48 states, as well as a branch in the Commonwealth of Puerto Rico. In addition, Schwab serves clients through branch offices in the U.K. and Hong Kong through other subsidiaries of Schwab;

 

   

Charles Schwab Bank, Schwab’s principal banking entity; and

 

   

Charles Schwab Investment Management, Inc., the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds®) and Schwab’s exchange-traded funds (Schwab ETFsTM).

Schwab provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking, and support services, as well as retirement business services, to independent RIAs, independent retirement advisors, and recordkeepers.

Schwab was incorporated in the State of Delaware on November 25, 1986. The principal trading market for Schwab common stock (NYSE: SCHW) is the NYSE. The principal executive offices of Schwab are located at 211 Main Street, San Francisco, California 94105; its telephone number is (415) 667-7000; and its website is www.schwab.com.

TD Ameritrade Holding Corporation

TD Ameritrade is a leading provider of securities brokerage services and related technology-based financial services to retail clients and independent RIAs. TD Ameritrade provides services to individual retail investors and traders and to RIAs predominantly through the Internet, a national branch network and relationships with RIAs. TD Ameritrade uses its platform to offer brokerage services to retail investors and traders under a simple, low cost structure and brokerage custodial services to RIAs.

TD Ameritrade has been an innovator in electronic brokerage services since entering the retail securities brokerage business in 1975. TD Ameritrade believes that it was the first brokerage firm to offer the following products and services to retail clients: touch-tone trading; trading over the Internet; mobile trading; unlimited, streaming, free real-time quotes; extended trading hours; direct access to market destinations; commitment on the speed of order execution; and trading of select securities 24 hours a day, five days a week. Over the years the number of brokerage accounts, RIA relationships, average daily trading volume and total assets in client accounts have substantially increased. TD Ameritrade has also built, and continues to invest in, a proprietary trade processing platform that is both cost-efficient and highly scalable, significantly lowering its operating costs per trade. In addition, TD Ameritrade has made significant investments in building the TD Ameritrade brand.

TD Ameritrade was originally incorporated in the State of Delaware on April 1, 2002. The principal trading market for TD Ameritrade common stock (NASDAQ: AMTD) is NASDAQ. TD Ameritrade’s principal executive offices are located at 200 South 108th Avenue, Omaha, Nebraska 68154; its telephone number is (800) 669-3900; and its website is www.tdameritrade.com.

 

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Americano Acquisition Corp.

Merger Sub is a wholly owned subsidiary of Schwab. Merger Sub was formed solely for the purpose of completing the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the merger.

Merger Sub was incorporated in the State of Delaware on November 19, 2019. The principal executive offices of Merger Sub are located at 211 Main Street, San Francisco, California 94105, and its telephone number is (415) 667-7000.

 

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THE SCHWAB SPECIAL MEETING

Schwab is providing this joint proxy statement/prospectus to Schwab stockholders in connection with the solicitation of proxies to be voted at the Schwab special meeting (or any adjournment or postponement thereof) that Schwab has called to consider and vote on a proposal to approve the share issuance, a proposal to approve the Schwab charter amendment and the Schwab adjournment proposal.

Date, Time and Location

Together with this joint proxy statement/prospectus, Schwab is also sending Schwab stockholders a notice of the Schwab special meeting and a form of proxy card that is solicited by the Schwab board of directors for use at the Schwab special meeting to be held on [], 2020, at [], located at [], at [], local time, and any adjournments or postponements of the Schwab special meeting.

Purpose

At the Schwab special meeting, Schwab stockholders will be asked to consider and vote on the following:

 

   

to approve the share issuance;

 

   

to approve the Schwab charter amendment; and

 

   

to approve the Schwab adjournment proposal.

Under the Schwab bylaws, the business to be conducted at the Schwab special meeting will be limited to the proposals set forth in the notice to Schwab stockholders provided with this joint proxy statement/prospectus.

Recommendation of the Schwab Board of Directors

The Schwab board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the share issuance and the Schwab charter amendment, are advisable and fair to, and in the best interests of, Schwab and the Schwab stockholders, and unanimously recommends that Schwab stockholders vote “FOR” the approval of the share issuance, “FOR” the approval of the Schwab charter amendment and “FOR” the Schwab adjournment proposal. See “Schwab Proposal I: Approval of the Share Issuance,” “Schwab Proposal II: Approval of the Schwab Charter Amendment” and “Schwab Proposal III: Approval of the Schwab Adjournment Proposal” beginning on pages 203, 204 and 205, respectively, of this joint proxy statement/prospectus for a more detailed discussion of the recommendation of the Schwab board of directors that Schwab stockholders approve the share issuance, the Schwab charter amendment and the Schwab adjournment proposal.

Schwab Record Date; Outstanding Shares; Schwab Stockholders Entitled to Vote

The Schwab board of directors has fixed the close of business on [], 2020 as the record date for the determination of the Schwab stockholders entitled to vote at the Schwab special meeting or any adjournment or postponement thereof. Only Schwab stockholders of record at the Schwab record date are entitled to receive notice of, and to vote at, the Schwab special meeting or any adjournment or postponement thereof. As of the close of business on the Schwab record date, there were [●] shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting.

Quorum

The Schwab bylaws provide that the holders of a majority in voting interest of the outstanding shares of Schwab common stock entitled to vote, present in person or by proxy, will constitute a quorum for the transaction of business at the Schwab special meeting. Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the Schwab special meeting. Shares of Schwab common

 

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stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record, and shares of Schwab common stock with respect to which the beneficial owner otherwise fails to vote, will not be deemed present at the Schwab special meeting for the purpose of determining the presence of a quorum. Failure of a quorum to be present at the Schwab special meeting will necessitate an adjournment of the meeting and will subject Schwab to additional expense.

Required Vote

The required votes to approve the proposals to be considered at the Schwab special meeting are as follows:

 

   

the affirmative vote of the holders of a majority of shares of Schwab common stock present at the Schwab special meeting in person or by proxy at the Schwab special meeting (which meets or exceeds the minimum requirement under the rules of the NYSE of a majority of the votes cast by holders of shares of Schwab common stock), a quorum being present, is required to approve the share issuance;

 

   

the affirmative vote of the holders of a majority of the shares of Schwab common stock outstanding and entitled to vote at the Schwab special meeting is required to approve the Schwab charter amendment; and

 

   

the affirmative vote of the holders of a majority of shares of Schwab common stock present at the Schwab special meeting in person or by proxy and entitled to vote at the Schwab special meeting, whether or not a quorum is present, is required to approve the Schwab adjournment proposal.

As described above, the significant Schwab stockholders have entered into the significant Schwab stockholders voting agreement, pursuant to which they have agreed with TD Ameritrade to vote all of their shares of Schwab common stock in favor of the approval of the share issuance, the Schwab charter amendment and the Schwab adjournment proposal.

Stock Ownership of and Voting by Schwab’s Directors and Executive Officers

As of the close of business on [●], 2020, the Schwab record date, Schwab’s directors and executive officers and their affiliates beneficially owned and were entitled to vote approximately [●] shares of Schwab common stock, or approximately [●]% of the shares of Schwab common stock outstanding on that date.

It is currently expected that Schwab’s directors and executive officers will vote their shares of Schwab common stock in favor of each of the proposals to be considered and voted on at the Schwab special meeting, but none of them, other than Charles R. Schwab pursuant to the significant Schwab stockholders voting agreement, have entered into any agreement obligating them to do so.

Treatment of Abstentions; Failure to Vote

Under the current rules and interpretive guidance of the NYSE, an abstention is considered a vote cast for purposes of the vote to approve the share issuance. Under this standard and the standard applicable under the Schwab bylaws, an abstention from voting will have the same effect as a vote “AGAINST” the proposal. Also under either standard, assuming a quorum is present, the failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have no effect on the vote to approve the share issuance.

A Schwab stockholder’s abstention from voting, the failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the Schwab charter amendment.

 

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A Schwab stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the Schwab adjournment proposal. The failure of a Schwab stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Schwab stockholder’s other failure to vote will have no effect on the Schwab adjournment proposal

Voting of Shares

Via the Internet or by Telephone

If you hold shares of Schwab common stock directly in your name as a stockholder of record, you may vote via the Internet or by telephone by following the instructions provided on your proxy card. Votes submitted via the Internet or by telephone must be received by 11:59 p.m. (Central Time) on [], 2020.

If you hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, you may vote via the Internet or by telephone only if Internet or telephone voting is made available by your broker, bank, nominee or other holder of record. Please follow the instructions on your voting instruction form provided by your broker, bank, nominee or other holder of record with these materials.

By Mail

If you hold shares of Schwab common stock directly in your name as a stockholder of record, you will need to complete, sign and date your proxy card and return it using the postage-paid return envelope provided or return it to Schwab’s transfer agent, Equiniti Trust Company. You must mail your proxy card so that Schwab’s transfer agent receives it no later than [], 2020.

If you hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, to vote by mail, you will need to sign, date and mark the voting instruction form provided by your broker, bank, nominee or other holder of record and return it in the postage-paid return envelope provided. Your broker, bank, nominee or other holder of record must receive your voting instruction form in sufficient time to vote your shares of Schwab common stock.

In Person

If you hold shares of Schwab common stock directly in your name as a stockholder of record, you may vote in person at the Schwab special meeting. Stockholders of record also may be represented by another person at the Schwab special meeting by executing a proper proxy designating that person and having that proper proxy be presented to the inspector of election with the applicable ballot at the Schwab special meeting.

If you hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, you must obtain a written legal proxy from that institution and present it to the inspector of election with your ballot to be able to vote in person at the Schwab special meeting. To request a legal proxy, please contact your broker, bank, nominee or other holder of record.

Please carefully consider the information contained in this joint proxy statement/prospectus and, whether or not you plan to attend the Schwab special meeting, submit your proxy via the Internet, by telephone or by mail so that your shares of Schwab common stock will be voted in accordance with your wishes even if you later decide not to attend the Schwab special meeting.

When a stockholder of record submits a proxy via the Internet or by telephone, his or her proxy is recorded immediately. We encourage you to submit your proxy via the Internet or by telephone whenever possible. If you submit a proxy via the Internet or by telephone, please do not return your proxy card by mail. If you attend the

 

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Schwab special meeting, you may also submit your vote in person, in which case any proxies that you previously submitted—whether via the Internet, by telephone or by mail—will be superseded by the vote that you cast at the Schwab special meeting. To vote in person at the Schwab special meeting, beneficial owners who hold shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record will need to contact the broker, bank, nominee or other holder of record to obtain a legal proxy to bring to the meeting. Whether your proxy is submitted via the Internet, by telephone or by mail, if it is properly completed and submitted, and if you do not revoke it prior to or at the Schwab special meeting, your shares of Schwab common stock will be voted at the Schwab special meeting in the manner set forth in this joint proxy statement/prospectus or as otherwise specified by you. Again, you may vote via the Internet or by telephone until 11:59 p.m. Central Time on [], 2020, or Schwab’s transfer agent must receive your paper proxy card by mail no later than [], 2020. Your attendance at the Schwab special meeting alone will not revoke any proxy previously given.

General

All shares represented by each properly completed and valid proxy received before the Schwab special meeting will be voted in accordance with the instructions given on the proxy. If a Schwab stockholder signs a proxy card and returns it without giving instructions for voting on any proposal, the shares of Schwab common stock represented by that proxy card will be voted “FOR” the share issuance, “FOR” the Schwab charter amendment and “FOR” the Schwab adjournment proposal.

Your vote is very important, regardless of the number of shares of Schwab common stock you own. Whether or not you expect to attend the Schwab special meeting in person, please vote or otherwise submit a proxy to vote your shares of Schwab common stock as promptly as possible so that your shares of Schwab common stock may be represented and voted at the Schwab special meeting. If your shares of Schwab common stock are held in the name of a broker, bank, nominee or other holder of record, please follow the instructions on the voting instruction form furnished to you by such record holder.

Attendance at the Schwab Special Meeting and Voting in Person

Only stockholders or their proxy holders may attend the Schwab special meeting. If you plan to attend the Schwab special meeting, please be prepared to present picture identification, such as a driver’s license or passport, to gain admission to the Schwab special meeting.

If you are a beneficial owner of shares of Schwab common stock held in “street name,” meaning that your shares are held by a broker, bank, nominee or other holder of record, at the Schwab record date, in addition to proper identification, you will also need to provide an account statement or letter from the nominee indicating that you were the beneficial owner of the shares at the Schwab record date to be admitted to the Schwab special meeting. A brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of Schwab common stock held in “street name” in person at the Schwab special meeting, you will have to obtain a legal proxy in your name from the broker, bank, nominee or other holder of record who holds your shares.

Revocability of Proxies; Changing Your Vote

If you are a Schwab stockholder of record at the Schwab record date (the close of business on [], 2020), you can revoke your proxy or change your vote by:

 

   

sending a signed notice that bears a date later than the date of the proxy you want to revoke stating that you revoke your proxy to EQ Shareowner Services, PO Box 64859, St Paul, MN 55164. Equiniti Trust Company must receive your proxy card no later than [] on [], 2020;

 

   

submitting a valid, later-dated proxy by mail that is received before [], 2020 or via the Internet or by telephone before 11:59 p.m. Central Time on [], 2020; or

 

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attending the Schwab special meeting (or, if the Schwab special meeting is adjourned or postponed, attending the adjourned or postponed meeting) and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not revoke any proxy previously given.

If you hold your shares of Schwab common stock in “street name” through a broker, bank, nominee or other holder of record, you must contact your broker, bank, nominee or other holder of record to change your vote or obtain a legal proxy to vote your shares of Schwab common stock if you wish to cast your vote in person at the Schwab special meeting.

Solicitation of Proxies; Expenses of Solicitation

This joint proxy statement/prospectus is being provided to holders of Schwab common stock in connection with the solicitation of proxies to be voted at the Schwab special meeting (or any adjournment or postponement thereof). Schwab will bear all costs and expenses in connection with the solicitation of proxies, including the costs of filing, printing and mailing this joint proxy statement/prospectus for the Schwab special meeting. Schwab has engaged D.F. King & Co., Inc., a proxy solicitation firm, to assist in the solicitation of proxies for the Schwab special meeting and will pay D.F. King & Co., Inc. an estimated fee of $20,000, plus reimbursement of reasonable out-of-pocket expenses.

In addition to solicitation by mail, directors, officers and employees of Schwab or its subsidiaries may solicit proxies from stockholders by telephone, telegram, email, personal interview or other means. Directors, officers and employees of Schwab will not receive additional compensation for their solicitation activities, but may be reimbursed for reasonable out-of-pocket expenses incurred by them in connection with the solicitation. Brokers, dealers, commercial banks, trust companies, fiduciaries, custodians and other nominees have been requested to forward proxy solicitation materials to their clients and such nominees may be reimbursed for their reasonable out-of-pocket expenses.

Householding

The SEC has adopted a rule concerning the delivery of annual reports and proxy statements. It permits Schwab, with your permission, to send a single notice of meeting and, to the extent requested, a single set of this joint proxy statement/prospectus to any household at which two or more Schwab stockholders reside if they appear to be members of the same family. This rule is called “householding,” and its purpose is to help reduce printing and mailing costs of proxy materials.

A number of brokerage firms have instituted householding. If you and members of your household have multiple accounts holding shares of Schwab common stock, you may have received a householding notification from your broker. Please contact your broker directly if you have questions, require additional copies of this joint proxy statement/prospectus or wish to revoke your decision to household. These options are available to you at any time.

Tabulation of Votes

Schwab has appointed Equiniti Trust Company to serve as the inspector of election for the Schwab special meeting. [] will independently tabulate affirmative and negative votes and abstentions.

Adjournments

Schwab stockholders are being asked to approve a proposal that will give the Schwab board of directors authority to adjourn the Schwab special meeting from time to time if necessary to solicit additional proxies if there are not sufficient votes to approve the share issuance or the Schwab charter amendment at the time of the

 

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Schwab special meeting, or any adjournment or postponement thereof. If this proposal is approved, the Schwab special meeting could be adjourned to any date. In addition, the Schwab board of directors, with or without Schwab stockholder approval, could postpone the meeting before it commences, whether for the purpose of soliciting additional proxies or for other reasons. At any adjourned meeting, all proxies previously received will be voted in the same manner as they would have been voted at the original convening of the Schwab special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

Other Information

The matters to be considered at the Schwab special meeting are of great importance to the Schwab stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and submit your proxy via the Internet or by telephone or complete, date, sign and promptly return the enclosed proxy card in the enclosed postage-paid envelope. If you submit your proxy via the Internet or by telephone, you do not need to return the enclosed proxy card.

Assistance

If you need assistance submitting your proxy via the Internet or by telephone or completing your proxy card, or have questions regarding the Schwab special meeting, please contact:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Telephone Toll-Free: (800) 884-5101

Telephone Call Collect: (212) 269-5550

Email: schw@dfking.com

or

The Charles Schwab Corporation

211 Main Street

San Francisco, California 94105

Attention: Investor Relations

Telephone: (415) 667-7000

Email: investor.relations@schwab.com

 

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THE TD AMERITRADE SPECIAL MEETING

TD Ameritrade is providing this joint proxy statement/prospectus to TD Ameritrade stockholders in connection with the solicitation of proxies to be voted at the TD Ameritrade special meeting (or any adjournment or postponement thereof) that TD Ameritrade has called to consider and vote on a proposal to approve and adopt the merger agreement, the TD Ameritrade merger-related compensation proposal and the TD Ameritrade adjournment proposal.

Date, Time and Location

Together with this joint proxy statement/prospectus, TD Ameritrade is also sending TD Ameritrade stockholders a notice of the TD Ameritrade special meeting and a form of proxy card that is solicited by the TD Ameritrade board of directors for use at the TD Ameritrade special meeting to be held on [], 2020, at [], located at [], at [], local time, and any adjournments or postponements of the TD Ameritrade special meeting.

Purpose

At the TD Ameritrade special meeting, TD Ameritrade stockholders will be asked to consider and vote on the following:

 

   

to approve and adopt the merger agreement;

 

   

to approve, on a non-binding, advisory basis, the TD Ameritrade merger-related compensation proposal; and

 

   

to approve the TD Ameritrade adjournment proposal.

Under TD Ameritrade’s by-laws, the business to be conducted at the TD Ameritrade special meeting will be limited to the purposes set forth in the notice to TD Ameritrade stockholders provided with this joint proxy statement/prospectus.

Recommendation of the Strategic Development Committee and the TD Ameritrade Board of Directors

The strategic development committee, acting with the advice of its own legal and financial advisors, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, TD Ameritrade and TD Ameritrade stockholders other than TD Bank and its affiliates, and unanimously resolved to recommend to the TD Ameritrade board of directors that it approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger.

The TD Ameritrade board of directors, acting upon the unanimous recommendation of the strategic development committee, unanimously (i) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, TD Ameritrade and TD Ameritrade stockholders, (ii) approved and adopted the merger agreement and the transactions contemplated by the merger agreement, including the merger, and (iii) resolved to recommend that TD Ameritrade stockholders approve and adopt the merger agreement, including the merger, at the TD Ameritrade special meeting.

The TD Ameritrade board of directors, acting upon the unanimous recommendation of the strategic development committee, unanimously recommends that TD Ameritrade stockholders vote “FOR” the approval and adoption of the merger agreement, “FOR” the TD Ameritrade merger-related compensation proposal and “FOR” the TD Ameritrade adjournment proposal. See “TD Ameritrade Proposal I: Approval and Adoption of the Merger Agreement,” “TD Ameritrade Proposal II: Advisory Vote on TD Ameritrade Merger-Related Compensation” and “TD Ameritrade Proposal III: Approval of the TD Ameritrade Adjournment Proposal”

 

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beginning on pages 200, 201 and 202, respectively, of this joint proxy statement/prospectus for a more detailed discussion of the recommendation of the TD Ameritrade board of directors that TD Ameritrade stockholders approve and adopt the merger agreement and approve the TD Ameritrade merger-related compensation proposal and the TD Ameritrade adjournment proposal.

TD Ameritrade Record Date; Outstanding Shares; TD Ameritrade Stockholders Entitled to Vote

The TD Ameritrade board of directors has fixed the close of business on [], 2020 as the record date for the determination of the TD Ameritrade stockholders entitled to vote at the TD Ameritrade special meeting or any adjournment or postponement of the TD Ameritrade special meeting. Only TD Ameritrade stockholders of record at the TD Ameritrade record date are entitled to receive notice of, and to vote at, the TD Ameritrade special meeting or any adjournment or postponement thereof. As of the close of business on the TD Ameritrade record date, there were [●] shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting.

Quorum

TD Ameritrade’s by-laws provide that the holders of a majority of the voting power of all outstanding shares of capital stock of TD Ameritrade entitled to vote, present in person or represented by proxy, will constitute a quorum for the transaction of business at the TD Ameritrade special meeting.

Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the TD Ameritrade special meeting. Shares of TD Ameritrade common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record, and shares of TD Ameritrade common stock with respect to which the beneficial owner otherwise fails to vote, will not be deemed present at the TD Ameritrade special meeting for the purpose of determining the presence of a quorum.

Failure of a quorum to be present at the TD Ameritrade special meeting will necessitate an adjournment or postponement of the meeting and will subject TD Ameritrade to additional expense.

Voting of Shares

Your vote is important. We expect that many TD Ameritrade stockholders will not attend the TD Ameritrade special meeting in person, and instead will be represented by proxy. Most TD Ameritrade stockholders have a choice of voting over the Internet, by using a toll-free telephone number or by returning a completed proxy card or voting instruction form. Please check your notice, proxy card or the information forwarded by your broker, bank, nominee or other holder of record to see which options are available to you. The Internet and telephone voting procedures have been designed to authenticate stockholders, to allow you to vote your shares and to confirm that your instructions have been properly recorded. The Internet and telephone voting facilities for TD Ameritrade stockholders of record will close at [] on [], 2020. If you hold shares of TD Ameritrade common stock in “street name” through a broker, bank, nominee or other holder of record and Internet or telephone facilities are made available to you, these facilities may close sooner than those for TD Ameritrade stockholders of record.

You can revoke your proxy at any time before it is exercised by delivering a properly executed, later-dated proxy (including an Internet or telephone vote) that is received before [] on [], 2020, by voting by ballot at the TD Ameritrade special meeting or by delivering, before [] on [], 2020, to TD Ameritrade’s Investor Relations Department (at TD Ameritrade’s executive offices located at 200 South 108th Avenue, Omaha, Nebraska 68154, Attention: Investor Relations) a signed written notice of revocation bearing a later date than the proxy, stating that the proxy is revoked. Executing your proxy in advance will not limit your right to vote at the TD Ameritrade special meeting if you decide to attend in person. However, if your shares are held in the name of a broker, bank, nominee or other holder of record, you cannot vote at the TD Ameritrade special meeting unless you have a legal proxy, executed in your favor, from the holder of record.

 

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All shares of TD Ameritrade common stock entitled to vote and represented by properly executed proxies received prior to the TD Ameritrade special meeting and not revoked will be voted at the TD Ameritrade special meeting in accordance with your instructions. If you sign and return your proxy but do not indicate how your shares should be voted on a proposal, the shares of TD Ameritrade common stock represented by your proxy will be voted as the TD Ameritrade board of directors recommends for such proposal.

If you hold shares of TD Ameritrade common stock pursuant to the TD Ameritrade Holding Corporation Associates 401(k) Profit Sharing Plan and Trust, which is referred to in this joint proxy statement/prospectus as the TD Ameritrade 401(k) Plan, see “—Voting Your Shares Held through the TD Ameritrade 401(k) Plan by Proxy” for information regarding how to vote your shares held under the TD Ameritrade 401(k) Plan.

A complete list of TD Ameritrade stockholders entitled to vote at the TD Ameritrade special meeting will be available in the Investor Relations Department (at TD Ameritrade’s executive offices located at 200 South 108th Avenue, Omaha, Nebraska 68154) for examination by any TD Ameritrade stockholder for purposes germane to the TD Ameritrade special meeting, during ordinary business hours for a period of ten days before the TD Ameritrade special meeting, and at the time and place of the TD Ameritrade special meeting.

Required Vote

The required votes to approve the proposals to be considered at the TD Ameritrade special meeting are as follows:

 

   

approval and adoption of the merger agreement requires the affirmative vote of (i) the holders of a majority of the shares of TD Ameritrade common stock outstanding and entitled to vote at the TD Ameritrade special meeting and (ii) the holders (other than TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) of a majority of the shares of TD Ameritrade common stock (other than shares of TD Ameritrade common stock held by TD Bank, the significant TD Ameritrade stockholders and their respective affiliates) outstanding and entitled to vote at the TD Ameritrade special meeting;

 

   

approval of the TD Ameritrade merger-related compensation proposal requires the affirmative vote of the holders of a majority of the total shares of TD Ameritrade common stock present in person or represented by proxy and voting on the matter at the TD Ameritrade special meeting, assuming a quorum is represented at the meeting. Because the vote on the TD Ameritrade merger-related compensation proposal is advisory only, it will not be binding on either TD Ameritrade or Schwab. Accordingly, if the merger agreement is approved and adopted and the merger is completed, the TD Ameritrade merger-related compensation will be payable to TD Ameritrade’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the TD Ameritrade merger-related compensation proposal; and

 

   

approval of the TD Ameritrade adjournment proposal requires the affirmative vote of the holders of a majority of the total shares of TD Ameritrade common stock present in person or represented by proxy and voting on the matter at the TD Ameritrade special meeting, assuming a quorum is represented at the meeting.

Concurrently with the execution of the merger agreement, Schwab entered into the TD Bank voting agreement with TD Bank, which holds approximately [●]% of the outstanding shares of TD Ameritrade common stock as of the TD Ameritrade record date, and the significant TD Ameritrade stockholders voting agreement with the significant TD Ameritrade stockholders, who hold approximately [●]% of the outstanding shares of TD Ameritrade common stock as of the TD Ameritrade record date. Pursuant to the TD Bank voting agreement and the significant TD Ameritrade stockholders voting agreement, TD Bank and the significant TD Ameritrade stockholders, respectively, have agreed to vote all of their shares of TD Ameritrade common stock “FOR” the approval and adoption of the merger agreement and “FOR” the TD Ameritrade adjournment proposal.

 

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Stock Ownership of and Voting by TD Ameritrade’s Directors and Executive Officers

As of the close of business on [●], 2020, the TD Ameritrade record date, TD Ameritrade’s directors and executive officers and their affiliates beneficially owned and were entitled to vote approximately [●] shares of TD Ameritrade common stock, or approximately [●]% of the shares of TD Ameritrade common stock outstanding on that date.

It is currently expected that TD Ameritrade’s directors and executive officers will vote their shares of TD Ameritrade common stock in favor of each of the proposals to be considered and voted on at the TD Ameritrade special meeting, but none of them have entered into any agreement obligating them to do so.

Treatment of Abstentions; Failure to Vote

For purposes of the TD Ameritrade special meeting, an abstention occurs when a TD Ameritrade stockholder attends the TD Ameritrade special meeting, either in person or by proxy, but abstains from voting.

 

   

For the proposal to approve and adopt the merger agreement, if a TD Ameritrade stockholder present in person at the TD Ameritrade special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the effect of a vote cast “AGAINST” such proposal. If a TD Ameritrade stockholder is not present in person at the TD Ameritrade special meeting and does not respond by proxy, it will have the effect of a vote cast “AGAINST” such proposal.

 

   

For the TD Ameritrade merger-related compensation proposal, if a TD Ameritrade stockholder present in person at the TD Ameritrade special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have no effect on the vote count for the TD Ameritrade merger-related compensation proposal. If a TD Ameritrade stockholder is not present in person at the TD Ameritrade special meeting and does not respond by proxy, it will have no effect on the vote count for the TD Ameritrade merger-compensation proposal.

 

   

For the TD Ameritrade adjournment proposal, if a TD Ameritrade stockholder present in person at the TD Ameritrade special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have no effect on the vote count for such proposal. If a TD Ameritrade stockholder is not present in person at the TD Ameritrade special meeting and does not respond by proxy, it will have no effect on the vote count for the TD Ameritrade adjournment proposal.

Voting of Proxies by Holders of Record

If you were the record holder of shares of TD Ameritrade common stock as of the TD Ameritrade record date, you may submit your proxy to vote such shares via the Internet, by telephone or by mail. For additional information, please see the section entitled “The TD Ameritrade Special Meeting—TD Ameritrade Record Date; Outstanding Shares; TD Ameritrade Stockholders Entitled to Vote.” Note that if you hold shares through the TD Ameritrade 401(k) Plan, please see “—Voting Your Shares Held through the TD Ameritrade 401(k) Plan by Proxy” for information regarding how to vote your shares held under the TD Ameritrade 401(k) Plan.

Voting via the Internet or by Telephone

 

   

To submit your proxy via the Internet, go to the website listed on your enclosed TD Ameritrade proxy card. Have your TD Ameritrade proxy card in hand when you access the website and follow the instructions to vote your shares.

 

   

To submit your proxy by telephone, call []. Have your TD Ameritrade proxy card in hand when you call and follow the instructions to vote your shares.

 

   

If you vote via the Internet or by telephone, you must do so no later than [] on [], 2020.

 

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Voting by Mail

As an alternative to submitting your proxy via the Internet or by telephone, you may submit your proxy by mail.

 

   

To submit your proxy by mail, simply mark your TD Ameritrade proxy card, date and sign it and return it in the postage-paid envelope. If you do not have the postage-paid envelope, please mail your completed TD Ameritrade proxy card to the following address: [].

 

   

If you vote by mail, your TD Ameritrade proxy card must be received no later than [] on [], 2020.

Voting Your Shares Held through the TD Ameritrade 401(k) Plan by Proxy

If shares of TD Ameritrade common stock are allocated to your account under the TD Ameritrade 401(k) Plan, such shares will be voted by the plan trustee as directed by you. You may direct the plan trustee on how to vote the shares allocated to your plan account by telephone, mail or via the Internet in accordance with the instructions you will receive in the mail. In any case, your voting instructions must be received by the trustee before [] on [], 2020. If shares of TD Ameritrade common stock are allocated to your account under the TD Ameritrade 401(k) Plan and your voting instructions are not received by the trustee by this deadline, the shares allocated to your plan account will not be voted. Because the trustee is designated to vote on your behalf, you will not be able to vote your shares allocated to your account under the TD Ameritrade 401(k) Plan in person at the TD Ameritrade special meeting.

General

All properly signed proxies that are timely received and that are not revoked will be voted at the TD Ameritrade special meeting according to the instructions indicated on the proxies or, if no direction is indicated, they will be voted as recommended by the TD Ameritrade board of directors.

Voting of Shares Held in Street Name

If your shares of TD Ameritrade common stock are held in an account at a broker, bank, nominee or other holder of record (i.e., in “street name”), you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the broker, bank, nominee or other holder of record. You may not vote shares held in street name by returning a TD Ameritrade proxy card directly to TD Ameritrade or by voting in person at the TD Ameritrade special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker, nominee or other holder of record. Further, brokers, banks, nominees or other holders of record who hold shares of TD Ameritrade common stock on behalf of their clients may not give a proxy to TD Ameritrade to vote those shares with respect to the proposal to approve and adopt the merger agreement, the TD Ameritrade merger-related compensation proposal and the TD Ameritrade adjournment proposal without specific instructions from their clients, as brokers, banks, nominees or other holders of record do not have discretionary voting power on these “non-routine” matters. Under applicable stock exchange rules, each of the three proposals to be considered at the TD Ameritrade special meeting as described in this joint proxy statement/prospectus are considered non-routine. Therefore brokers, banks, nominees or other holders of record do not have discretionary authority to vote on any of the three proposals to be considered at the TD Ameritrade special meeting. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.

Therefore, if you are a TD Ameritrade stockholder and you do not instruct your broker, bank, nominee or other holder of record on how to vote your shares:

 

   

your broker, bank, nominee or other holder of record may not vote your shares on the proposal to approve and adopt the merger agreement, which will have the same effect as a vote “AGAINST” such proposal;

 

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your broker, bank, nominee or other holder of record may not vote your shares on the TD Ameritrade merger-related compensation proposal, which will have no effect on the vote count for such proposal; and

 

   

your broker, bank, nominee or other holder of record may not vote your shares on the TD Ameritrade adjournment proposal, which will have no effect on the vote count for such proposal.

Attendance at the TD Ameritrade Special Meeting and Voting in Person

You or your authorized proxy may attend the TD Ameritrade special meeting if you were a registered or beneficial owner of TD Ameritrade common stock as of the TD Ameritrade record date.

You will need to obtain an admission ticket in advance to attend the TD Ameritrade special meeting. To do so, please make your request by mail to TD Ameritrade’s Investor Relations Department at 200 South 108th Avenue, Omaha, Nebraska 68154, by email at jeffrey.goeser@tdameritrade.com or by phone at (402) 597-8464. TD Ameritrade’s Investor Relations Department must receive your request for an admission ticket on or before [], 2020. Seating will be limited and requests for tickets will be processed in the order in which they are received.

If you own shares in street name through an account with a broker, bank, nominee or other holder of record, then send proof of your TD Ameritrade stock ownership as of the TD Ameritrade record date (for example, a brokerage firm account statement or a “legal proxy” from your intermediary) along with your ticket request. If you are not sure what proof to send, check with your intermediary.

For security reasons, be prepared to show a form of government-issued photo identification when presenting your ticket for admission to the TD Ameritrade special meeting. If you forget to bring your ticket, you will be admitted only if you provide photo identification. If you do not request a ticket in advance, you will be admitted only if space is available and you provide photo identification and satisfactory evidence that you were a stockholder of TD Ameritrade common stock as of the TD Ameritrade record date. If you need special assistance at the TD Ameritrade special meeting because of a disability, please contact TD Ameritrade’s Investor Relations Department.

No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the TD Ameritrade special meeting.

Your vote is very important, regardless of the number of shares of TD Ameritrade common stock you own. Whether or not you expect to attend the TD Ameritrade special meeting in person, please vote or otherwise submit a proxy to vote your shares of TD Ameritrade common stock as promptly as possible so that your shares of TD Ameritrade common stock may be represented and voted at the TD Ameritrade special meeting. If your shares of TD Ameritrade common stock are held in the name of a broker, bank, nominee or other holder of record, please follow the instructions on the voting instruction form furnished to you by such record holder.

Revocability of Proxies; Changing Your Vote

If you are a TD Ameritrade stockholder of record at the TD Ameritrade record date (the close of business on [], 2020), you can revoke your proxy or change your vote by:

 

   

sending a signed notice that bears a date later than the date of the proxy you want to revoke stating that you revoke your proxy to TD Ameritrade’s Investor Relations Department (at TD Ameritrade’s executive offices at 200 South 108th Avenue, Omaha, Nebraska 68154, Attention: Investor Relations). TD Ameritrade’s Investor Relations Department must receive your proxy card no later than [] on [], 2020; or

 

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submitting a valid, later-dated proxy by mail that is received before [] on [], 2020 or via the Internet or by telephone before [] on [], 2020; or

 

   

attending the TD Ameritrade special meeting (or, if the TD Ameritrade special meeting is adjourned or postponed, attending the adjourned or postponed meeting) and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not revoke any proxy previously given.

If you hold your shares of TD Ameritrade common stock in “street name” through a broker, bank, nominee or other holder of record, you must contact your broker, bank, nominee or other holder of record to change your vote or obtain a legal proxy to vote your shares of TD Ameritrade common stock if you wish to cast your vote in person at the TD Ameritrade special meeting.

Solicitation of Proxies; Expenses of Solicitation

This joint proxy statement/prospectus is being provided to holders of TD Ameritrade common stock in connection with the solicitation of proxies to be voted at the TD Ameritrade special meeting (or any adjournment or postponement thereof). TD Ameritrade will bear all costs and expenses in connection with the solicitation of proxies, including the costs of filing, printing and mailing this joint proxy statement/prospectus for the TD Ameritrade special meeting. TD Ameritrade has engaged Innisfree M&A Incorporated, a proxy solicitation firm, to assist in the solicitation of proxies for the TD Ameritrade special meeting and will pay Innisfree M&A Incorporated a fee of approximately $25,000 plus reimbursement of reasonable out-of-pocket expenses.

In addition to solicitation by mail, directors, officers and employees of TD Ameritrade or its subsidiaries may solicit proxies from stockholders by telephone, telegram, email, personal interview or other means. Directors, officers and employees of TD Ameritrade will not receive additional compensation for their solicitation activities, but may be reimbursed for reasonable out-of-pocket expenses incurred by them in connection with the solicitation. Brokers, dealers, commercial banks, trust companies, fiduciaries, custodians and other nominees have been requested to forward proxy solicitation materials to their clients and such nominees may be reimbursed for their reasonable out-of-pocket expenses.

Householding

The SEC has adopted a rule concerning the delivery of annual reports and proxy statements. It permits TD Ameritrade, with your permission, to send a single notice of meeting and, to the extent requested, a single set of this joint proxy statement/prospectus to any household at which two or more TD Ameritrade stockholders reside if they appear to be members of the same family. This rule is called “householding,” and its purpose is to help reduce printing and mailing costs of proxy materials.

A number of brokerage firms have instituted householding. If you and members of your household have multiple accounts holding shares of TD Ameritrade common stock, you may have received a householding notification from your broker. Please contact your broker directly if you have questions, require additional copies of this joint proxy statement/prospectus or wish to revoke your decision to household. These options are available to you at any time.

Tabulation of Votes

TD Ameritrade has appointed [] to serve as the inspector of election for the TD Ameritrade special meeting. [] will independently tabulate affirmative and negative votes and abstentions.

Adjournments

Subject to certain restrictions contained in the merger agreement, the TD Ameritrade special meeting may be adjourned to allow additional time for obtaining additional proxies. No notice of an adjourned meeting need

 

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be given if the time and place thereof are announced at the TD Ameritrade special meeting at which the adjournment was taken unless:

 

   

the adjournment is for more than 30 days, in which case a notice of the adjourned meeting will be given to each TD Ameritrade stockholder of record entitled to vote at the TD Ameritrade special meeting; or

 

   

if, after the adjournment, a new record date for determination of TD Ameritrade stockholders entitled to vote is fixed for the adjourned meeting.

At any adjourned meeting, all proxies previously received will be voted in the same manner as they would have been voted at the original convening of the TD Ameritrade special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

Other Information

The matters to be considered at the TD Ameritrade special meeting are of great importance to the TD Ameritrade stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and submit your proxy via the Internet or by telephone or complete, date, sign and promptly return the enclosed proxy card in the enclosed postage-paid envelope. If you submit your proxy via the Internet or by telephone, you do not need to return the enclosed proxy card.

Assistance

If you need assistance with voting via the Internet or by telephone or completing your proxy card, or have questions regarding the TD Ameritrade special meeting, please contact TD Ameritrade’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders Call Toll-Free: (877) 456-3422

Banks and Brokers Call Collect: (212) 750-5833

 

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THE MERGER

General

This joint proxy statement/prospectus is being provided to holders of TD Ameritrade common stock in connection with the solicitation of proxies to be voted at the TD Ameritrade special meeting and at any adjournments or postponements of the TD Ameritrade special meeting. At the TD Ameritrade special meeting, TD Ameritrade will ask TD Ameritrade stockholders to consider and vote on (i) a proposal to approve and adopt the merger agreement, (ii) a proposal to approve, on a non-binding, advisory basis, the TD Ameritrade merger-related compensation proposal and (iii) a proposal to approve the TD Ameritrade adjournment proposal.

This joint proxy statement/prospectus is being provided to holders of Schwab common stock in connection with the solicitation of proxies to be voted at the Schwab special meeting and at any adjournments or postponements of the Schwab special meeting. At the Schwab special meeting, Schwab will ask Schwab stockholders to consider and vote on (i) a proposal to approve the share issuance, (ii) a proposal to approve the Schwab charter amendment and (iii) a proposal to approve the Schwab adjournment proposal.

The merger agreement provides for the merger of Merger Sub with and into TD Ameritrade, with TD Ameritrade continuing as the surviving corporation and a wholly owned subsidiary of Schwab. The merger will not be completed unless TD Ameritrade stockholders approve and adopt the merger agreement and Schwab stockholders approve the share issuance and the Schwab charter amendment. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. You are urged to read the merger agreement in its entirety because it is the legal document that governs the merger. For additional information about the merger, see “The Merger Agreement—Structure of the Merger” and “The Merger Agreement—Merger Consideration” beginning on pages 152 and 153, respectively, of this joint proxy statement/prospectus.

Upon completion of the merger, each share of TD Ameritrade common stock (except for shares of TD Ameritrade common stock held by TD Ameritrade as treasury stock or by Schwab (other than any fiduciary shares) which will be cancelled without payment) will automatically be converted into the right to receive 1.0837 shares of Schwab common stock, except that TD Bank and its affiliates will receive Schwab common stock only up to a maximum of the voting limitation percentage of the Schwab common stock (including any other shares of Schwab common stock then owned by TD Bank and its affiliates) and will otherwise receive shares of Schwab nonvoting common stock. Based on the number of shares of TD Ameritrade common stock outstanding as of [], 2020, Schwab expects to issue approximately [●] Schwab common shares to TD Ameritrade stockholders pursuant to the merger. The actual number of Schwab common shares to be issued pursuant to the merger will be determined at completion of the merger based on the exchange ratio and the number of shares of TD Ameritrade common stock outstanding at such time. Based on the number of shares of TD Ameritrade common stock outstanding as of [], 2020, and the number of shares of Schwab common shares (including Schwab common stock and Schwab nonvoting common stock) outstanding as of [], 2020, it is expected that, immediately after completion of the merger, former TD Ameritrade stockholders will own approximately [●]% of the outstanding Schwab common shares (including Schwab common stock and Schwab nonvoting common stock).

The Parties

The Charles Schwab Corporation

Schwab is a savings and loan holding company, headquartered in San Francisco, California. Schwab was incorporated in the State of Delaware in 1986 and engages, through its subsidiaries, in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. At December 31, 2019, Schwab had $4.04 trillion in client assets, 12.3 million active brokerage accounts, 1.7 million corporate retirement plan participants, and 1.4 million banking accounts.

Principal business subsidiaries of Schwab include the following:

 

   

Charles Schwab & Co., Inc., incorporated in 1971, a securities broker-dealer with over 360 domestic branch offices in 48 states, as well as a branch in the Commonwealth of Puerto Rico. In addition,

 

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Schwab serves clients through branch offices in the U.K. and Hong Kong through other subsidiaries of Schwab;

 

   

Charles Schwab Bank, Schwab’s principal banking entity; and

 

   

Charles Schwab Investment Management, Inc., the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds®) and Schwab’s exchange-traded funds (Schwab ETFsTM).

Schwab provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking, and support services, as well as retirement business services, to independent RIAs, independent retirement advisors, and recordkeepers.

Schwab was incorporated in the State of Delaware on November 25, 1986. The principal trading market for Schwab common stock (NYSE: SCHW) is the NYSE. The principal executive offices of Schwab are located at 211 Main Street, San Francisco, California 94105; its telephone number is (415) 667-7000; and its website is www.schwab.com.

TD Ameritrade Holding Corporation

TD Ameritrade is a leading provider of securities brokerage services and related technology-based financial services to retail clients and independent RIAs. TD Ameritrade provides services to individual retail investors and traders and to RIAs predominantly through the Internet, a national branch network and relationships with RIAs. TD Ameritrade uses its platform to offer brokerage services to retail investors and traders under a simple, low cost structure and brokerage custodial services to RIAs.

TD Ameritrade has been an innovator in electronic brokerage services since entering the retail securities brokerage business in 1975. TD Ameritrade believes that it was the first brokerage firm to offer the following products and services to retail clients: touch-tone trading; trading over the Internet; mobile trading; unlimited, streaming, free real-time quotes; extended trading hours; direct access to market destinations; commitment on the speed of order execution; and trading of select securities 24 hours a day, five days a week. Over the years the number of brokerage accounts, RIA relationships, average daily trading volume and total assets in client accounts have substantially increased. TD Ameritrade has also built, and continues to invest in, a proprietary trade processing platform that is both cost-efficient and highly scalable, significantly lowering its operating costs per trade. In addition, TD Ameritrade has made significant investments in building the TD Ameritrade brand.

TD Ameritrade was originally incorporated in the State of Delaware on April 1, 2002. The principal trading market for TD Ameritrade common stock (NASDAQ: AMTD) is NASDAQ. TD Ameritrade’s principal executive offices are located at 200 South 108th Avenue, Omaha, Nebraska 68154; its telephone number is (800) 669-3900; and its website is www.tdameritrade.com.

Americano Acquisition Corp.

Merger Sub is a wholly owned subsidiary of Schwab. Merger Sub was formed solely for the purpose of completing the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the merger.

Merger Sub was incorporated in the State of Delaware on November 19, 2019. The principal executive offices of Merger Sub are located at 211 Main Street, San Francisco, California 94105, and its telephone number is (415) 667-7000.

Background of the Merger

The board of directors and management teams of each of Schwab and TD Ameritrade regularly review and assess the performance, strategy, competitive position, opportunities and prospects of their respective companies

 

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in light of the current business, economic and regulatory environments, as well as developments in the industries that provide brokerage and related services and the opportunities and challenges facing participants in those industries, in each case with the goal of enhancing value for their respective stockholders. For each company, these reviews have included consideration of, and discussions with, other companies from time to time regarding potential strategic alternatives, including, in the case of TD Ameritrade, potential business combinations and other strategic transactions as well as remaining an independent company.

In connection with such reviews, representatives of Schwab, TD Ameritrade and TD Bank have, from time to time, held preliminary discussions regarding a potential transaction, including during the summer of 2018, in October 2018 and between December 2018 and March 2019. However, prior to October 2019, such discussions did not result in a proposal for a strategic transaction on which the parties moved forward.

I