At a time where exchange mergers are stealing headlines, mergers between even large brokers are getting lost in the shuffle. In March, Charles Schwab announced it had reached an agreement to acquire optionsXpress in a deal with a total transaction value of approximately $1 billion.
In a letter to optionsXpress customers, CEO David Fisher said, "optionsXpress will be the ‘Center of Excellence’ for options, futures and forex trading for the combined organization, complementing and accelerating Schwab’s current strategy of building a ‘best-in-class’ experience for active investors. Our partnership with Schwab will bring you direct access to many exciting Schwab products, including Schwab’s investing, brokerage and banking services."
Paul Rowady, senior analyst at Tabb Group, says the move comes as a "me too" approach after TD Ameritrade acquired thinkorswim in a similar $606 million deal that was announced in January 2009.
Under the terms of the agreement, optionsXpress stockholders will receive 1.02 shares of Schwab stock for each share of optionsXpress stock. Based on Schwab’s closing stock price as of March 18, 2011, the transaction values each optionsXpress share at $17.91, a 17% premium over their then current value. The deal is expected to be finalized in the third quarter of 2011. On a pro forma basis, the combined organizations would have generated net revenues of $4.479 billion in 2010.
OptionsXpress currently has 250 employees in Chicago and another 150 divided among California, Texas and Australia. Fisher has said he does not expect any job cuts from the merger. He has agreed to stay on at the combined company as president.
"It is an indication of the continuing evolution of retail adoption of options. It’s another incremental indicator that this trend will continue," Rowady says.