Summary
The Charles Schwab Corporation (SCHW) has announced a significant strategic move with the sale of its U.S. Trust Corporation subsidiary to Bank of America for $3.3 billion in cash. This divestiture is expected to generate a substantial pre-tax gain of approximately $1.9 billion for Schwab, with after-tax proceeds anticipated to be around $2.5 billion. The company plans to utilize these proceeds for general corporate purposes, including share repurchases and reinvestment in its core businesses: Schwab Investor Services, Schwab Institutional, and Charles Schwab Bank. The transaction is anticipated to close in the second quarter of 2007, contingent upon customary closing conditions, regulatory approvals, and, notably, the approval of new investment advisor agreements for the Excelsior mutual funds by fund boards and shareholders. The sale marks a strategic shift for Schwab, allowing it to focus resources on its growth areas.
Key Highlights
- 1Schwab agrees to sell U.S. Trust Corporation to Bank of America for $3.3 billion in cash.
- 2The sale is expected to result in a pre-tax gain of approximately $1.9 billion for Schwab.
- 3After-tax proceeds from the sale are estimated to be around $2.5 billion.
- 4Proceeds will be used for general corporate purposes, including share repurchases and investment in core businesses.
- 5The transaction is targeted to close in the second quarter of 2007.
- 6Closing is subject to regulatory approvals, customary conditions, and approval of investment advisor agreements for Excelsior mutual funds.
- 7A retention agreement has been approved for Peter K. Scaturro, CEO of U.S. Trust, contingent on the sale's completion.