In a bid to diversify its revenue streams and increase its customer base,Internet brokerage E*Trade (NYSE: ET)announced Monday that it has inked a deal to acquire rival online broker Web Street (Nasdaq: WEBS) for US$45 million in stock.
The purchase includes all of Web Street’s 34,000 active accounts as well as its physical branches in San Francisco and Beverly Hills, California; Boston, Massachusetts; and Denver, Colorado.
Web Street’s brick-and-mortar locations will be converted to E*Trade centers and adopt the company’s financialsuperstore concept.
Menlo Park, California-based E*Trade said it expects the acquisition to addearnings and revenue immediately upon closing. The deal is subject toregulatory and other approvals.
“The acquisition of Web Street further demonstrates the strength of theE*Trade brand and its agility to seize opportunities that make strategicsense,” said E*Trade chairman of the board and chief executive officer Christos M. Cotsakos.
In a breakdown of its purchase price, E*Trade said that $25 millionrepresents the acquisition of Web Street’s business and accounts, and theremaining $20 million applies to the buyout of the four physical locations,cash on hand and net operating losses, which E*Trade anticipates will result infuture tax savings.
E*Trade said the deal, which values Web Street at about $1.74 per share,will add $25 million a year to E*Trade’s annual revenue.
In April, E*Trade reported a net loss for the quarter ended March 31st of $7.2 million, or 2 cents per share, compared with a loss of $25.5 million, or 9cents, a year earlier.
In early trading Monday, E*Trade remained steady, inching up 6 cents to$9.26.
E*Trade has been working to differentiate itself from itscompetition by expanding both its offerings and its global reach.
Earlier this month, the online broker launched E*TradeIsrael, its first site in the Middle East. The company currentlyoperates sites in 11 other countries, including Australia, Denmark andJapan.
In January, the company acquired online mortgage originator LoansDirect.comas a springboard for entering the consumer credit market. Morerecently, E*Trade opened a brick-and-mortar superstore in New York City.
The company is also expanding its alliance with discount retailer Target by putting more than 1,000 newautomated teller machines and 20 additional customer service centers inTarget stores across the United States.
Online brokerage houses may be facing a wave of consolidation as the harshstock market climate continues to batter bottom lines.
Earlier this month, it was reported that Canadian Imperial Bank of Commerce is in advanced negotiations topurchase online brokerage Ameritrade (Nasdaq: AMTD) for up to $1.8 billion.
Although Ameritrade declined to comment on the report, Ameritrade chairmanJoe Ricketts, who with his family owns more than 60 percent of the company,reportedly said recently that he would be willing to sell Ameritrade if theprice were right.
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