INVESTools Announces Merger with thinkorswim, Combines Leading Investor Education Firm with Top-Ranked Online Brokerage Platform
September 19 2006 - 7:00AM
Business Wire
INVESTools Inc. (NASDAQ:IEDU), the market leader in fulfilling the
lifelong education needs of self-directed investors, and
thinkorswim Group Inc., a leading online brokerage platform serving
the execution needs of self-directed investors, announced today
that they have signed a definitive agreement to merge the two
companies in a transaction valued at approximately $340 million.
thinkorswim is a rapidly growing online brokerage firm that focuses
primarily on self-directed investors. Ranked #1 by Barron's for
options traders in March 2006, thinkorswim's retail trading
platform and functionality are recognized among the industry's best
for execution, professional analytics and real-time position
management. thinkorswim also has an institutional platform
targeting professionals, broker dealers and hedge funds as well as
an asset management arm servicing retail investors seeking
discretionary money management. This transaction combines two
rapidly growing, highly innovative and free cash flow generating
companies, which have complementary businesses and customer bases.
Strategic rationale behind the merger include the following: -- The
combination of INVESTools' education capabilities with
thinkorswim's best-in-class trading platform creates a unique
business model with the ability to offer differentiated product
offerings for the retail investor; -- INVESTools' continuing
education offerings, which represent more than 80% of its sales,
are principally based on options, complementing thinkorswim's
award-winning options-oriented execution platform; -- The
combination of two leading technology-based companies will create
operating leverage in product innovation resulting in increased
lifetime value and recurring revenue from each student. "INVESTools
has been committed to educating investors since 1983. With over 80%
of our sales transaction volume originating from the purchase of
our continuing education products, our students have become among
the most confident, active and knowledgeable individual investors
in the market. With the majority of our continuing education
programs based on options strategies, our students have been
demanding a seamless education to the execution learning experience
in both stock and options securities," said Lee K. Barba, Chairman
and CEO of INVESTools. "This merger creates that student experience
for the first time." "This is a strategic, transforming merger
based on account acquisition synergies generated by INVESTools'
students who can now be educated and trade on an integrated
platform with top-rated technology. When our students succeed, our
shareholders benefit -- this merger represents the first time that
the economics of account acquisition for an online broker are
turned on their head and account acquisition becomes a profit
center rather than a cost, in the process originating an account
whose owner knows how to use the award wining applications and
technology to their fullest to achieve better results," added Mr.
Barba. Tom Sosnoff, thinkorswim CEO stated, "It's time to take our
customers to another level and this merger brings the resources to
thinkorswim to accomplish that. INVESTools has the passion and
spirit to empower investors through education, which has also been
the cornerstone of thinkorswim's success. The new firm will be a
powerful combination of great educational services and advanced
trading technology from which all our customers will benefit."
Financial and Operational Highlights INVESTools expects the
acquisition to be accretive during 2007, and to extend lifetime
customer value and to enhance customer retention. Underlying the
expected synergies are the following factors: -- The demographics
of INVESTools' educated student base provide an attractive
cross-selling opportunity. INVESTools' more than 250,000 graduates,
including 42,700 new graduates in the past twelve months, are
expected to more than double thinkorswim's 15,300 accounts within
twelve months following closing; -- The combination of INVESTools'
educational products with thinkorswim's powerful trading platform
is expected to create a compelling offering to attract new
customers and enhance student retention; -- The merger will
leverage INVESTools' student acquisition costs with a leading
brokerage platform that will increase and extend lifetime value of
the student. For the 12 months ended June 30, 2006, thinkorswim
generated revenue and net income of $45.1 million and $11.2
million, respectively, after adjusting for certain items. Key
retail performance metrics for August 2006 for thinkorswim include
the following: -- Total funded accounts: 15,300; -- Daily average
revenue trades (DARTs): 7,500; -- Client assets: $826 million; --
Annual churn rate: 12%. Transaction Terms and Structure The Boards
of Directors of both companies have unanimously approved the merger
transaction. The terms of the transaction include: -- thinkorswim
shareholders will receive 50% of merger consideration in cash, and
50% in stock, representing approximately $170 million in cash and
19.1 million IEDU common shares; -- JPMorgan Chase Bank, N.A. and
J.P. Morgan Securities Inc. will provide INVESTools a senior
secured term loan of $125 million to fund a portion of the cash
transaction and will also provide an unfunded committed senior
secured revolving credit facility of $25 million; -- Following the
transaction, thinkorswim shareholders will have a 30% ownership
stake in INVESTools; -- thinkorswim will receive two seats on an
expanded eight-member INVESTools' Board of Directors; --
thinkorswim employees will be eligible to receive a $20 million
retention pool that will be paid over 3 years and 2.2 million
INVESTools options vesting over 4 years, of which 50% will be at
the market price at transaction closing, and 50% will be at 150% of
the market price at closing. Approvals The merger is subject to
NASD and INVESTools shareholder approval, and is expected to be
completed by the first quarter of 2007. A special meeting of
INVESTools shareholders will be announced following preparation and
filing of proxy materials with the Securities and Exchange
Commission. Advisors Paragon Capital Partners, LLC initiated this
transaction, and acted as INVESTools' financial advisor in
connection with the proposed merger and with respect to the
financing of this transaction. Updata Securities, Inc. provided a
fairness opinion to INVESTools with respect to this transaction.
Conference Call Webcast Information A conference call to discuss
the acquisition is scheduled for 9:00 a.m. Eastern today. The call
is being webcast by Thomson CCBN and will be available through
INVESTools' website at http://www.investools.com under Investor
Relations. About INVESTools INVESTools Inc. is a global leader in
investor education. The Company offers a full range of investor
education products and services that provide lifelong learning in a
variety of delivery formats, including instructor-led workshops,
"at home" study programs, personal training sessions and through
the Web. More than 250,000 investors around the world have
graduated from INVESTools investor education programs. Visit the
Company's corporate Web site at http://www.investools.com for more
information regarding the INVESTools Method(TM). About thinkorswim
thinkorswim is headquartered in Chicago, Illinois and has offices
in Bloomfield Hills, Michigan and Needham, Massachusetts. As a
leading retail option brokerage firm, thinkorswim specializes in
options and also offers customers a broad range of products
including equities, futures, mutual funds, and bonds. The company
supports retail and institutional traders through its own trading
platforms and is widely recognized as the premier option software
for execution, professional analytics and real-time position
management. thinkorswim has revolutionized the option industry by
teaching and executing complex, non-directional option strategies
with single-click functionality that has now become the industry
standard. thinkorswim continues to evolve the financial marketplace
by delivering education and products that benefit the customer
whether they are hedging, speculating or enhancing returns.
thinkorswim recently received Barron's top rating in their 2006
Annual Survey of Best Online Brokers. thinkorswim's platform
surpassed its peer group as Barron's choice for options traders and
was the only firm to ever finish #1 and #2 in software and
web-based ratings. Important Additional Information Regarding the
Merger will be filed with the SEC In connection with the
solicitation of proxies from the shareholders of INVESTools to,
among other things, approve the issuance of INVESTools common stock
in connection with the proposed merger, INVESTools will file a
proxy statement with the Securities and Exchange Commission (the
"SEC"). INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE
PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES TO THE
MERGER. Investors and security holders may obtain a free copy of
the proxy statement (when available) and other documents filed by
INVESTools at the SEC website at http://www.sec.gov. The proxy
statement and other documents also may be obtained for free from
INVESTools by directing such request to INVESTools Inc., Attention:
Investor Relations, 13947 South Minuteman Drive, Draper, Utah 84020
or email at investor.relations@investools.com. INVESTools and its
directors, executive officers and other members of its management
and employees may be deemed participants in the solicitation of
proxies from its stockholders in connection with, among other
things, the approval of the issuance of INVESTools common stock in
connection with the proposed merger. Information concerning the
interests of INVESTools' participants in the solicitation, which
may be different than those of INVESTools stockholders generally,
is set forth in INVESTools' proxy statements and Annual Reports on
Form 10-K, previously filed with the SEC, and will be set forth in
the proxy statement when it becomes available. Forward-looking
Statements All statements in this press release that are not
historical are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Such
forward-looking statements may be identified by words such as
"believe," "intend," "expect," "may," "could," "would," "will,"
"should," "plan," "project," "contemplate," "anticipate," or
similar statements. Because these statements reflect the Company's
current views concerning future events, these forward-looking
statements are subject to risks and uncertainties. The Company has
made every reasonable effort to ensure that the information and
assumptions on which these statements and projections are based are
current, reasonable, and complete. However, a variety of factors
could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in
this press release, including, without limitation, the ability to
successfully integrate acquired and potential additional operating
companies; the success of brand development efforts and strategic
alliances; demand for the Company's products and services; the
ability to compete effectively and adjust to changing market
conditions; inability to protect the Company's proprietary
technology; difficulties or delays in developing improved products
when expected or desired and with the additional features
contemplated or desired; the potential for intellectual property
infringement, warranty, product liability, and other claims; the
uncertainties associated with governmental regulation; and other
factors detailed from time to time in INVESTools' SEC filings. The
forward-looking statements are made only as of the date hereof and
the Company assumes no obligation to publicly update or revise the
forward-looking statements whether as a result of new information,
future events, or otherwise.
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