Charles Schwab Corp. (NYSE: SCHW) said it agreed to buy optionsXpress Holdings, Inc., (NASDAQ: OXPS) for about $1 billion in stock to expand in the fast-growing options trading space.
Schwab will pay $17.91 to each share of optionsXpress, representing a premium of 17 percent to the company's closing price on March 18. For each share, stockholders of optionsXpress will receive 1.02 shares of Schwab stock.
"The combination of optionsXpress and Schwab will offer active investors an unparalleled level of service and platform capabilities," said Walt Bettinger, Schwab President and CEO.
"Options investors at Schwab tend to be among the larger, more active and longer-standing of our client relationships, Bettinger said.
The deal will help Schwab to expand in one of the fastest growing businesses, namely options trading. Since 2002, options trading in the U.S. has increased each year and rose more than 7 percent in 2010 to touch volume of 3.61 billion, according to Options Clearing Corp.
Schwab expects the deal to be modestly accretive over the first full year of combined operations, including expected revenue and expense synergies totaling about $80 million. On a pro forma basis, the combined organizations would have generated net revenues of $4.479 billion in 2010.
Meanwhile, stockholders owning 22.9 percent of optionsXpress have agreed to vote in favor of the deal, which is expected to close during the third quarter, subject to customary closing conditions.
Upon completion of the acquisition, current CEO David Fisher will continue to lead optionsXpress as its President and a Schwab Senior Vice President.
Launched in 2001 and headquartered in Chicago, optionsXpress is a retail online brokerage focused on equity options and futures, which together account for about 80 percent of its trading activity. Its innovative brokerage platform provides active investors and traders with trading tools, analytics and education to execute a wide variety of investment strategies. As of February 28, 2011, optionsXpress had 385,200 client accounts, $8.1 billion in client assets and a 12 month average of 44,800 daily average revenue trades.
Founded in 1973, Schwab operates the nation's largest independent brokerage in terms of client assets, which totaled $1.6 trillion as of February 28, 2011.Today Schwab serves nearly ten million individual investor, independent registered investment advisor and corporate retirement plan participant accounts with a wide range of financial products and full-service investment help and advice.
Shares of Schwab were down 9 cents at $17.41 on the NYSE, while shares of optionsXpress were up $2.29 or 14.94 percent at $17.62 on Nasdaq.