US firm buys ShareLink

Charles Schwab Corporation, America's largest discount broker, yesterday made an agreed bid for ShareLink, the Birmingham-based share-dealing group. The merger could transform the way private investors in the UK buy stocks and shares.

ShareLink offers an execution-only service, providing low-cost dealing facilities to private investors. This contrasts with traditional brokers, who offer services such as research, advice and portfolio management, for which they charge additional fees.

In the US Schwab has established a reputation as a low-cost, highly efficient provider of execution-only dealing, with a network of more than 200 branches. Last year it made profits of $224m on sales of $1.065bn and the company is capitalised at $2.5bn (£1.5bn).

The ShareLink deal represents the group's first overseas expansion, though it has an office in London which deals mainly with US citizens living in the UK.

ShareLink, backed by Schwab, may now open a similar branch network here. David Jones, the firm's founder and chief executive, said yesterday a high street presence would be considered but was not inevitable.

The use of PCs and touchtone phones to conduct share deals is another avenue that may be exploited. Schwab conducts 25 per cent of its deals through these methods compared with a negligible amount by ShareLink.

Schwab is making a cash offer of 235p per share for the company, valuing ShareLink at £39.7m.

ShareLink did well during the share bull market of 1993 but suffered last year when the market turned and investors stayed away. It made a £500,000 loss in the six months to September.

Mr Jones will remain as chief executive together with his existing management team. Charles Schwab, who works out of San Francisco, will be appointed chairman. Mr Jones, who started ShareLink with an investment of just £4,000 in 1987, stands to make about £5.5m from the deal.

The offer is well above the 178p price of ShareLink shares before the talks were announced but below the 250p flotation price when ShareLink came to the market in 1993.