Japanese software and publishing company Softbank will shell out $400 million for a 27.2 per cent stake in online brokerage E*Trade.
With E*Trade, Softbank further strengthens its position as an Internet company, adding to its majority share in publisher Ziff-Davis and its 31 per cent stake in Geocities. And on Wednesday, the company raised its stake in portal site Yahoo to 35 per cent, in a $250 million transaction.
Yahoo and Geocities are two of the top five most visited Web domains, according to recent statistics.
E*Trade and Softbank had already agreed to set up joint ventures in Japan and Korea.
The $400 million from Softbank will allow E*Trade to invest in promotion and acquisitions. Prominent display on popular Web sites, the main means of online promotion, can be very expensive - E*Trade is paying a reported $25 million over two years for being featured prominently on America Online.
?This agreement further strengthens our balance sheet and ensures we are one of the best capitalised online investing companies, with the financial strength to pursue our growth strategy," said E*Trade president and CEO Christos Cotsakos in a statement.
Also, the investment is likely to result in deals between E*Trade and other Internet companies in which Softbank holds a stake.
The agreement includes a 'standstill' provision, which blocks Softbank from acquiring additional E*Trade shares over the next five years.
Softbank president and CEO Masayoshi Son said he believed online investing will be one of the highest growth business segments of the next decade. He also believed E*Trade would become the leading global provider of online investment services.
In its quarter ended 31 March, E*Trade had revenues of $53.3 million, up 66 per cent from a year earlier, and net income of $6.1 million. But the online brokerage market is fiercely competitive, with the price of online trades going steadily down.
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