Schwab expands into Canada
By Bloomberg News
Charles Schwab agreed to buy Priority Brokerage and Porthmeor Securities, two Canadian brokers, expanding the biggest U.S. brokerage into Canada.
San Francisco-based Schwab didn't disclose the price it paid for the two brokerages, which have about $120 million in customer assets. Schwab said it will combine the two into one unit called Charles Schwab Canada, to be run by Paul Bates, who currently is chief executive of both firms.
The acquisitions are the latest in Schwab's bid to create an international brokerage firm, with expertise in both discount brokering and financial services over the Internet. Schwab is currently in talks with several Japanese companies about a brokerage venture in Asia's largest market. In 1995, it bought Sharelink, the U.K.'s largest discount broker. It has since changed the name to Charles Schwab Europe.
"It's a continuation of Schwab's global expansion that started a few years ago in Europe," said Michael Flanagan, an analyst with Financial Service Analytics. "The Canadian market is a logical progression of this strategy.''
David Pottruck, co-chief executive of Schwab, said the growth of the Internet has helped Schwab expand internationally as well as in the United States., where customers using Schwab's Web site account for more than half the company's trading.
Part of the reason U.S. brokerages are expanding abroad is to serve small investors whose governments shift the financial burden of retirement to individuals from the state.
The No. 7 online brokerage, Donaldson, Lufkin & Jenrette, last month said it's forming a Japan-based online brokerage with Sumitomo Bank. Ameritrade, the No. 6 Web broker, is launching a trans-Altantic cross-border trading alliance with Deutsche Bank. Merrill Lynch bought retail brokerage businesses in Japan and Canada this year.
"Everyone wants to go international,'' said Bill Burnham, an electronic commerce analyst with Credit Suisse First Boston. Buying something abroad is "a good way to kick-start an operation.''
Bates has held various positions in the Canadian securities industry, including president of Marathon Brokerage. He is also a governor of the Toronto Stock Exchange. He will report to Luis Valencia, chief administrative officer in charge of international business at Schwab.
Bates said in an interview that he intends to hire aggressively in the next few months to expand the businesses. Schwab's takeover of the two companies will require regulatory approval in Canada. |
