Charles Schwab Returns to M&A Game

Published by: Mike Goldman on 21st Mar 2011 | View all blogs by Mike Goldman
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Charles Schwab Returns to M&A Game

Charles Schwab Corp. has announced it will pay $1 billion to acquire optionsXpress Holdings Inc., a smaller retail brokerage in a move to help Schwab take advantage of investors' growing openness to investing in options.

The friendly, all-stock takeover  was announced Monday afternoon and is a response to the increased comfort levels felt by individual traders over using options contracts to speculate and hedge, which is a significantly more complicated investment strategy than plain stock trading.

The deal marks a return to the acquisition arena for Schwab, who has been noticeably absent from it for a decade.  Insiders say the move will help the firm retain the most active and intelligent of its online trading clients as their strategies evolve.

US options trading has experienced strong growth in recent years, a big part of the reason Schwab's main competitor, TD Ameritrade Holding Corp. purchased options specialist thinkorswim in 2009.  optionsXpress, a 10 year-old firm, will also give Schwab an advantage in the fast-growing sector of trading foreign currencies and futures trading, as well as helping the company to diversify its online platform which currently relies heavily on cash equities.

The deal values optionsXpress at $17.91 per share, a 17 percent premium to the stock's Friday close.  News of the acquisition drove optionsXpress shares up 15 percent on Monday, while Schwab shares remained relatively flat.  The deal is expected to close sometime in the third quarter.

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