E*Trade Hungry For More Deals Following OptionsHouse Acquisition
Bloomberg News
In its first deal of the year, E*Trade Financial (ETFC) - Get Report has agreed to buy the holding company that operates online stocks and options trader OptionsHouse for $725 million cash.
"This is our first acquisition in some time," Paul Idzik, CEO of New York-based E*Trade, said during a call for analysts and investors on the deal. "We have been very disciplined in getting here."
E*Trade said it would finance the purchase of OptionsHouse parent Aperture New Holdings with $400 million of non-cumulative perpetual preferred stock. The CEO of Chicago-based OptionsHouse, Michael Curcio, will remain in his position until the deal's closing, expected in the fourth quarter of 2016. Following that, he will join E*Trade's senior management team.
Idzik called the deal a "landmark transaction" and noted that E*Trade was specifically interested in the brokerage business. Growth in its own options business was leveling off, so Idzik said the opportunity with OptionsHouse made sense.
"This transaction provides OptionsHouse customers with an expanded breadth of offerings, while they continue to enjoy the same tools, platform, value and quality services they have come to expect," Curcio said in a statement. The purchase will begin to boost profit in 2018, E*Trade said, and its effect on the bottom line will be neutral before then.
Along with the deal, E*Trade also announced that share repurchases would resume in the second half of 2017. During the three months through June, the company bought back $151 million of its stock, bringing total purchases under an $800 million plan authorized in November to $502 million.
Both E*Trade and OptionsHouse declined to comment on the deal process.
E*Trade slipped 2.5% after the acquisitions was announced, trading at $25.16 midmorning Monday. The company reported higher earnings on Thursday than analysts expected, with profit of 48 cents a share comparing with an average projection of 39 cents.
E*Trade remains interested in acquisitions that fit with its overall strategy, executives said.
"Number one on the hit parade would be finding brokerage opportunities to help add to our scale and our core business," Idzik said during the company's July 21 earnings call. Corporate services and payments businesses are also likely possibilities, he noted.
"There's some interesting things happening in the fintech space," Idzik said.
E*Trade engaged Credit Suisse as financial adviser on the deal, and David Hepp, Justin Askew, Neil Leff, Edward Gonzalez and Andrew Woodward of Skadden Arps Slate Meagher & Flom as legal advisers. The company has a $7.05 billion market valuation.
OptionsHouse retained Evercore ISI, Jefferies LLC and Paul, Weiss, Rifkind, Wharton & Garrison as advisers.