March 21, 2011

Schwab to Acquire OptionsXpress for $1 Billion in Stock

Bettinger says deal will benefit Schwab’s ‘active investor clients’

Charles Schwab Corp. announced Monday that it had signed a definitive agreement to acquire Chicago-based optionsXpress Holdings for Schwab stock valued at $1 billion, based on Schwab’s closing price on March 18 of $17.91 per share.

Schwab said the deal, under which optionsXpress shareholders will receive 1.02 Schwab shares for each share they hold of optionsXpress, was expected to close in the third quarter.

OptionsXpress has $7.8 billion in client assets and 379,000 accounts through which clients trade options, futures and foreign exchange on one of three platforms: Web-based, desktop and mobile. The company derives two-thirds of its revenue through commissions, was founded in 2001 and had 408 employees as of year-end 2010.

In its announcement, Schwab said that following the acquisition, “both companies will initially retain their separate brand identities,” and that David Fisher, optionsXpress CEO, will retain his position and become a Schwab senior VP, reporting to Schwab Investor Services COO Andy Gill.

In a statement, Schwab CEO Walt Bettinger characterized the acquisition as particularly benefiting Schwab’s “active investor clients,” and other high-net-worth Schwab clients, noting that options investors at Schwab “tend to be among the larger, more active and longer-standing of our client relationships.”  With the acquisition, Schwab says it will offer a “best in class trading platform” for its retail clients.

Schwab said it expected the acquisition would be “modestly accretive over the first full year of combined operations, including expected revenue and expense synergies totaling approximately $80 million.” Schwab further said that it expected $55 million in merger and restructuring charges.

Schwab’s competitor in both the discount brokerage and advisor custodian space, TD Ameritrade, acquired options trading firm thinkorswim in 2009. During a speech at the TD Ameritrade Institutional annual conference in February, CEO Fred Tomczyk touted the firm’s acquisition as not simply a profitable deal, but one that showed TD Ameritrade’s commitment to help retail investors and advisor clients to trade more efficiently. In its recent review of online brokers, Barron’s named TD Ameritrade “best for options traders.”

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