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E-Trade grabs BrownCo from JPMorgan

FWR Staff 2 October 2005

E-Trade grabs BrownCo from JPMorgan

Discounter rolls up second online broker in less than two months. In yet another acquisition aimed at capturing customers with wallet shares bigger than those in its old base, E-Trade said late last week that it plans to buy deep discounter BrownCo from JPMorganChase. In August E-Trade struck twice, buying Harrisdirect from Canada’s BMO Financial and snapping up Kobren Insight Management, Wellesley, Mass.-based investment advisory.

“BrownCo is a premier brokerage asset and an ideal strategic fit for [us], accelerating the build out of our business model in this fast-consolidating industry,” says E-Trade CEO Mitchell Caplan. “The acquisition of BrownCo complements [our] recent acquisition of Harrisdirect, by strengthening and extending our asset gathering strategy with a strong customer demographic, while delivering greater scale.”

BrownCo’s 200,000-strong account base has an average balance of $145,000, the second highest in the discount aisle. Right off the bat E-Trade expects the $1.6 billion all-cash transaction with JPMorgan to double its margin balance – which stands at $3.2 billion sans BrownCo – up its assets by nearly $30 billion, increase customer cash holdings up $3.4 billion and boost trades by about 28,000 a day.

JPMorgan meanwhile is positioning the sale as an opportunity for its wealth group to “focus on its core investment management and wealth advisory activities.” –FWR

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