Charles Schwab Corp. has agreed to buy OptionsXpress Holdings Inc., a smaller U.S. retail brokerage, in a $1-billion deal meant to help Schwab take advantage of investors' stronger embrace of options.
The friendly, all-stock takeover, announced Monday, is a nod to the increased comfort felt by individual retail traders using options contracts to speculate and hedge, a far more complicated strategy than plain-vanilla stock trading.
The deal returns Schwab to the acquisition game after a quiet decade and could help the big asset manager hang on to the most active and shrewd of its online trading clients.
"It really just lets us jump the curve a little bit in terms of helping these highly valuable clients," Schwab Chief Executive Walt Bettinger said.
U.S. options trading volume has grown strongly in recent years, part of the reason Schwab's chief rival, TD Ameritrade Holding Corp., bought options specialist Thinkorswim in 2009.
Ten-year-old OptionsXpress also gives Schwab a leg up in fast-growing foreign exchange and futures trading, diversifying its online platform that now relies heavily on cash equities.
The deal values OptionsXpress at $17.91 per share, a 17% premium to its $15.33 closing price on Friday. OptionsXpress shares jumped 16.77% on Monday, while shares of San Francisco-based Schwab were mostly flat.
Under the deal, which is expected to close in the third quarter, each share of Chicago-based OptionsXpress would be swapped for 1.02 shares of Schwab. Schwab would issue 60 million shares in the transaction.
Options, like trading in foreign exchange, is an area that had not been embraced by mainstream investors in the past, said Alois Pirker, director of research at Aite Group, a research firm specializing in brokerages and securities markets.
"Mainstream investors are expanding their view of asset classes, and the Schwab deal is a reflection of that," he said.
OptionsXpress had 379,000 client accounts and $7.9 billion in client assets at the end of last year; Schwab had nearly 8 million accounts and $1.6 trillion in assets.