GENEVA/NEW YORK – Swiss-based banking giant UBS AG (UBS) has agreed to buy Charles Schwab Corp.'s (SCH) capital markets unit for $265 million in cash, making UBS a leading player on the U.S. Nasdaq exchange, the companies said on Tuesday.
UBS said it would integrate the unit, which comprises equities trading and sales and Schwab's Nasdaq trading system, into its investment bank. The unit matches buyers and sellers in more than 11,000 stocks and handles more than 200 million shares a day of trading volume.
The deal is the latest in a string of pinpoint purchases that has seen UBS strengthen its core activities in investment banking and wealth management. Analysts have said that the deal is too small to transform UBS in any significant way.
"This transaction is consistent with our organic growth plan in combination with targeted acquisitions," John Costas, chief executive of UBS Investment Bank, said in a statement.
The sale came less than eight months after Schwab, the largest U.S. discount brokerage, bought the business, now known as Schwab SoundView Capital Markets (search), for $321 million.
UBS said the transaction included an eight-year services agreement for the handling of Schwab's equities and listed options orders. It expects the transaction to close within 60 days.
Costas said the deal "will propel UBS to a leading position as a top trader of Nasdaq securities" as it executes transactions for third-party brokers and on-line brokers.
Knight Trading Group Inc. (NITE) is the biggest Nasdaq securities trader.
Analysts had earlier said the purchase would fortify UBS' market activities but they downplayed the impact the deal could have on the world's seventh-largest bank by market value. UBS shares edged slightly lower in early trading, in line with other European bank shares.
Cash-rich UBS has made a string of small acquisitions in recent months to boost its position as a major Wall Street investment bank and expand its core business of managing the money of the world's wealthy.
Last week, UBS said it had bought 50 percent of Russian equity broker Brunswick UBS from Brunswick Capital, giving it full ownership of the Moscow-based investment bank.
To round out its wealth management arm, UBS has bought the German wealth management division of Merrill Lynch, the French activities of Lloyds TSB plus UK wealth managers Laing & Cruickshank and Scott Goodman Harris.
The deals helped increase UBS's assets under management to $1.75 trillion at the end of June.
For San Francisco-based Schwab, the transaction marks a retrenchment from what investors and analysts have criticized as a years-long move away from its traditional strength as a discount brokerage.
In July, Schwab fired chief executive David Pottruck and brought back founder Charles Schwab to reverse a three-year slide marked by revenue declines, profit shortfalls and job cuts.
Schwab said the transaction will result in a $70 million to $80 million after-tax charge. It said it expected additional costs for exiting the business, including charges for severance and real estate, to result in $75 million to $85 million of after-tax charges in the remainder of 2004.