Filed by The Charles Schwab Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: optionsXpress Holdings, Inc.
Commission File No.: 001-32419
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements that refer to expectations, projections or other characterizations of future events or circumstances and are identified by words such as believe, anticipate, expect, estimate, intend, plan, will, may, aim, target, could, should, continue, build, improve, growth, increase, and other similar expressions. These forward-looking statements relate to the business combination transaction involving The Charles Schwab Corporation (Schwab) and optionsXpress Holdings, Inc. (optionsXpress), including expected synergies; timing of closing; client and stockholder benefits; management; accretion; growth; client retention; and merger-related charges which reflect managements beliefs, objectives and expectations as of the date hereof. Achievement of the expressed beliefs, objectives and expectations is subject to risks and uncertainties that could cause actual results to differ materially from those beliefs, objectives or expectations. Important transaction-related factors that may cause such differences include, but are not limited to, the risk that expected revenue, expense and other synergies from the transaction may not be fully realized or may take longer to realize than expected; the parties are unable to successfully implement their integration strategies; failure of the parties to satisfy the closing conditions in the merger agreement in a timely manner or at all, including regulatory approvals; failure of the optionsXpress stockholders to approve the merger; and disruptions to the parties businesses as a result of the announcement and pendency of the merger. Other important factors include general market conditions, including the level of interest rates, equity valuations and trading activity; the parties ability to attract and retain clients and grow client assets/relationships; competitive pressures on rates and fees; the level of client assets, including cash balances; the impact of changes in market conditions on money market fund fee waivers, revenues, expenses and pre-tax margins; capital needs; the parties ability to develop and launch new products, services and capabilities in a timely and successful manner; the effect of adverse developments in litigation or regulatory matters; any adverse impact of financial reform legislation and related regulations; and other factors set forth in Schwabs and optionsXpress Annual Reports on Form 10-K for the fiscal year ended December 31, 2010. Schwab and optionsXpress disclaim any obligation and do not intend to update or revise any forward-looking statements.
In connection with the proposed transaction, Schwab will file with the Securities and Exchange Commission (SEC) a registration statement on Form S-4 that will include a proxy statement/prospectus for the stockholders of optionsXpress. optionsXpress will mail the final proxy statement/prospectus to its stockholders. Investors and security holders are urged to read the proxy statement/prospectus regarding the proposed transaction and other relevant documents filed with the SEC when they become available because they will contain important information. Copies of all documents filed with the SEC regarding the proposed transaction may be obtained, free of charge, at the SECs website (http://www.sec.gov). These documents, when available, may also be obtained, free of charge, from Schwabs website, www.aboutschwab.com/investor, under the tab Financials and SEC Filings or from optionsXpress website, www.optionsXpress.com/investor, under the item SEC Filings.
Schwab, optionsXpress and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies from the optionsXpress stockholders in respect of the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed to be participants in the solicitation of the stockholders of optionsXpress in connection with the proposed transaction will be set forth in the proxy statement/prospectus when it is filed with the SEC. Information about Schwabs executive officers and
directors is available in Schwabs Annual Report on Form 10-K filed with the SEC on February 25, 2011 and Schwabs definitive proxy statement filed with the SEC on March 30, 2010. Information about optionsXpress executive officers and directors is available in optionsXpress definitive proxy statement filed with the SEC on April 15, 2010. You can obtain free copies of these documents from Schwab and optionsXpress using the contact information above.
The following is an investor presentation by Schwab and optionsXpress in connection with the proposed transaction.
**********
Redefining Full-Service Investing
A Best-in-Class Trading Platform for Clients
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2
Forward-Looking Statements
This
presentation
contains
forward-looking
statements
within
the
meaning
of
Section
27A
of
the
Securities
Act
of
1933
and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements include statements that refer to expectations, projections or
other characterizations of future events or circumstances and are identified by words such
as believe,
anticipate,
expect,
estimate,
intend,
plan,
will,
may,
aim,
target,
could,
should,
continue,
build,
improve,
growth,
increase, and other similar expressions. These forward-looking
statements relate to the business combination transaction involving Schwab
and optionsXpress, including expected synergies; timing of closing; client
and stockholder benefits; management; accretion; growth; client retention; and merger-related charges. These
forward-looking statements, which reflect managements beliefs, objectives
and expectations as of today, are necessarily
estimates
based
on
the
best
judgment
of
the
companies
senior
management.
Achievement
of
the
expressed beliefs, expectations and objectives is subject to risks and
uncertainties that could cause actual results to differ materially from
those beliefs, objectives or expectations. Important
factors
that
may
cause
such
differences
are
discussed
in
Schwabs
and
optionsXpress
filings
with
the
Securities and Exchange Commission, including their Annual Reports on Form
10-K. Other important transaction- related factors include, but
are not limited to, the risk that expected revenue, expense and other synergies from the
transaction may not be fully realized or may take longer to realize than expected;
the parties are unable to successfully implement their integration
strategies; failure of the parties to satisfy the closing conditions in the merger agreement in a
timely
manner
or
at
all,
including
regulatory
approvals;
failure
of
the
optionsXpress
stockholders
to
approve
the
merger;
and disruptions to the parties
businesses as a result of the announcement and pendency of the merger. Other
important factors include general market conditions, including the level of
interest rates, equity valuations and trading activity;
the
parties
ability
to
attract
and
retain
clients
and
grow
client
assets/relationships;
competitive
pressures
on
rates and fees; the level of client assets, including cash balances; the impact of
changes in market conditions on money market
fund
fee
waivers,
revenues,
expenses
and
pre-tax
margins;
capital
needs;
the
parties
ability
to
develop
and
launch new products, services and capabilities in a timely and successful manner;
the effect of unanticipated adverse developments in litigation or regulatory
matters; and any adverse impact of financial reform legislation and related
regulations.
The
information
in
this
presentation
speaks
only
as
of
March
21,
2011
(or
such
earlier
date
as
may
be
specified
herein).
The company makes no commitment to update any of this information.
|
3
Two financial services leaders are joining forces
The Charles Schwab Corporation, one of the nations largest brokerage service
providers is acquiring
optionsXpress Holdings, Inc, a pioneer in online brokerage focused on
derivatives Unites
complementary
trading
platform
strengths
across
equities,
options
and
futures
Combines broad range of investment products and services with extensive trading
tools, analytics and education for the benefit of all investors
Increases stockholder value through enhanced growth and operating leverage
|
4
Transaction Summary
Structured as a stock-for-stock exchange
$17.91 per share based on 3/18 close
1.02 shares of SCHW per share of OXPS
Approximately $1.0 billion total purchase price
Purchase price implies valuation multiples of 10.0x and 8.6x 2011 and 2012
EBITDA,
respectively
(1)
Targeted to close Q3 2011
Expected to be accretive (~1-2%) over first full year, including synergies in
the valuable options and futures trading arena
Increases Schwab total DART by 15%
Approximately $80 million in synergies
Voting agreement representing approximately 23% of outstanding shares
Requires approvals from regulators and optionsXpress stockholders; subject to
customary closing conditions
(1) Based on I/B/E/S analyst consensus estimates.
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5
The opportunity: derivatives trading volume continues to expand,
Source: OCC (options), BIS (futures), and Aite Group (forex).
Global Retail FX Trading Volumes ($ in Billions)
Global Futures Volume
(Contracts in Millions)
U.S. Listed Equity Options
(Contracts in Millions)
CAGR = 21.0%
CAGR = 19.2%
0
1,000
3,000
4,000
5,000
6,000
7,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
2001
2010
CAGR = 35.9%
2,000 |
6
the investors using these instruments represent a large and valuable
client segment
We believe there are 750K
1MM U.S. investors trading at least 120 times/year.
Estimated growth rates range into double digits
Compared
to
our
average
Investor
Services
client,
option
traders
at
Schwab
have:
3X the assets held at the company
2X the estimated assets held outside
6X the trading activity
2X the Schwab bank product utilization rate
25% longer Schwab tenure
Schwab clients are increasingly utilizing derivatives to generate income and
mitigate risk, with approximately 10% of DARTs coming from options.
4Q 2010 Options DARTs
45K
(000s)
27K
0
10
20
30
40
50
SCHW
SCHW + OXPS
27K
27K
18K |
7
and we recognize the importance of offering a full range of
investment platform capabilities to meet client needs.
The
general
investor
population
needs
ease,
convenience
and
education
Schwab offers branch/phone/web access, a broad range of investment products and
services including
advice;
integrated
brokerage
and
banking
capabilities;
and
a
host
of
resources
to
help
investors achieve better outcomes.
optionsXpress
client-focused
approach
to
derivatives
trading
includes
all-in-one
account
functionality;
a
choice
of
platforms;
and
an
extensive
education
program
that
includes
tutorials,
webinars and workshops.
Active
investors
need
access
to
a
full
suite
of
products
and
tools
and
the
ability
to
execute more complex transactions, without losing ease and convenience
Schwabs StreetSmart Edge is the companys most powerful, flexible and
intuitive securities trading platform to date.
optionsXpress combines web-based, software and mobile applications; online
trading tools that are both easy to use and powerful; and expert client
support to help derivatives traders execute both the simplest and most
sophisticated strategies. |
8
optionsXpress is a pioneer in equity options and futures trading
Launched in 2001, headquartered in Chicago, 408 employees (Dec. 2010)
Leading online broker focusing on equity options, futures and foreign
exchange
379K client accounts; $7.8 billion client assets, 44K DARTs in 2010
Offers three distinct platforms
browser-based, downloadable software and mobile -
to provide a
range of solutions for retail active investors
Trade securities and futures from same platform
Culture
of
persistent
innovation
portfolio
margining,
IDEAS,
Universal
Trade
Ticket
Education
Services
offers
a
range
of
education
products
covering
equities,
market
analysis,
options, financial planning and foreign exchange
Consistently top-rated by multiple publications
Commissions currently 2/3 of revenue, followed by education, interest and
other
Options and futures account for over 75% of retail DARTs
|
9
that will help our combined organization offer active investors an
unparalleled level of service and platform capabilities.
A
more
flexible
&
extendable
technology
platform
that
positions
Schwab
to
better
meet
active investor client needs today and in the future.
Schwab
Strong equity trading
capabilities
Broad product lineup, including
mutual funds, ETFs and bonds
Range of help and advice
options
Relentless client focus
optionsXpress
Strong derivatives trading
capabilities
Options and futures, also
foreign exchange
Trading tools and education for
all experience levels
Relentless client focus |
10
Pro
Forma
Client
and
Financial
Data
4Q
2010
Schwab
optionsXpress
Combined
Brokerage Accounts
7,998K
379K
8,377K
Client Assets
$1,574.5B
$7.8B
$1,582.3B
DARTs
272K
43K
315K
Options/DARTs
10%
43%
14%
Trading Revenue
$206
$45
$251
Total Revenue
$1,127
$56
$1,183 |
11
Synergies and 2012 Accretion
Accretion
1-2%
based
on
issuing
approximately
60
million
shares
(1)
Total synergies = $80 million in the first full year.
Expenses
25%
Public company expense, redundancies, duplicative project and marketing
spend Revenues
75%
Sweep cash
optionsXpress client cash balances roughly 40% of total client assets at
February 2010
Incremental options and futures trading by Schwab clients, portfolio margining
offer, incremental asset gathering / share-of-wallet among
optionsXpress clients Restructuring / merger-related charges = $55
million. optionsXpress will join Schwab Investor Services, initially
maintaining brand and existing operations
/
locations.
David
Fisher
will
continue
as
President
of
optionsXpress
and
be
named a Schwab Senior Vice President.
(1) Based on current fully-diluted shares of optionsXpress and 1.02 fixed
exchange ratio. |
12
This combination helps to build a best-in-class full-service investing
experience.
Improves the organizations scale, long-term growth and client
retention Complementary strengths across equities, options and futures
optionsXpress
derivative trading tools, analytics and education, as well as foreign
exchange capabilities, for Schwabs existing client base
Schwabs breadth of products and services for optionsXpress clients
A
more
flexible
&
extendable
technology
platform
that
positions
Schwab
to
better
meet
active investor client needs today and in the future.
|
Redefining Full-Service Investing
A Best-in-Class Trading Platform for Clients
|
14
Additional Information
In connection with the proposed transaction, Schwab will file with the Securities
and Exchange Commission (SEC) a registration statement on Form S-4 that
will include a proxy statement/prospectus for the stockholders of
optionsXpress. optionsXpress will mail the final proxy statement/prospectus
to its stockholders. Investors and security holders are urged to read
the proxy statement/prospectus regarding the proposed transaction and other relevant
documents filed with the SEC when they become available because they will contain
important information. Copies of all documents filed with the SEC
regarding the proposed transaction may be obtained, free of charge, at the SECs
website
These
documents,
when
available,
may
also
be
obtained,
free
of
charge,
from
Schwabs
website,
under
the
tab
Financials
and
SEC
Filings
or
from
optionsXpress
website,
under the item SEC Filings.
Schwab, optionsXpress and their respective directors, executive officers and
certain other members of management and employees may be deemed to be
participants in the solicitation of proxies from the optionsXpress stockholders in
respect of the proposed transaction. Information regarding the persons who
may, under the rules of the SEC, be deemed to be participants in the
solicitation of the stockholders of optionsXpress in connection with the proposed
transaction will be set forth in the proxy statement/prospectus when it is filed
with the SEC. Information about Schwabs executive officers and
directors is available in Schwabs Annual Report on Form 10-K filed with the SEC on
February 25, 2011 and Schwabs definitive proxy statement filed with the SEC
on March 30, 2010. Information about optionsXpress
executive
officers
and
directors
is
available
in
optionsXpress
definitive
proxy
statement
filed
with
the
SEC on April 15, 2010. You can obtain free copies of these documents from
Schwab and optionsXpress using the contact information above.
(http://www.sec.gov).
www.aboutschwab.com/investor,
www.optionsXpress.com/investor, |