--E*Trade names Paul Idzik its new CEO, its seventh chief
executive since late 2007
--New CEO to receive $9 million stock award, $1 million base
salary and up to $4.5 million cash bonus
--Any takeover premium that was built into share price likely to
be surrendered -Analyst
E*Trade Financial Corp. (ETFC) named Paul Idzik, former Barclays
PLC (BCS, BARC.LN) chief operating officer, as its chief executive,
the online brokerage's seventh CEO, counting interim heads, since
the company's mortgage woes began in late 2007.
The appointment, effective next Tuesday, caps the New York
company's roughly five-month search for a new CEO after it
dismissed its former head, Steven Freiberg, in August. Mr.
Freiberg, a former Citigroup Inc. (C) banker, was fired two years
into a four-year contract as E*Trade continues to reshuffle its
leadership amid struggles to recover from heavy losses in its
mortgage business.
Mr. Idzik, 51, will receive a $1 million base salary, a one-time
$9 million restricted stock award--that will vest over four
years--and is eligible to take home an annual cash bonus of up to
$4.5 million. In addition to being CEO, he will also lead E*Trade's
bank and serve on the company's board.
In a statement, E*Trade Chairman Frank Petrilli called Mr. Idzik
"the right person to lead E*Trade as we continue to execute on our
strategic and capital plan," touting his "strong leadership skills
and his demonstrated ability to deliver results and create
shareholder value."
After leaving Barclays in 2008, Mr. Idzik most recently worked
at DTZ Holdings PLC, a U.K. property consultant, which was acquired
by UGL Ltd. (UGL.AU), an Australian infrastructure firm. The deal
was announced in late 2011.
E*Trade's CEO announcement didn't generate a sustained buzz
among investors as the company's stock initially rose 1.7% on word
of its new leadership, but then reversed course, before finishing
up just a penny at $9.87. It recently rose 0.5% to $9.92 in
after-hours trading.
The lack of enthusiasm likely stems from the market's belief
that E*Trade won't be sold any time soon. In 2011, E*Trade was
publicly prodded by Citadel LLC, its largest shareholder, to sell
itself without success. E*Trade later elected to remain independent
amid sluggish market conditions and poor prospects for a deal,
though the company is still often mentioned as an acquisition
candidate.
In a note to clients, JMP Securities analyst David Trone wrote,
"We believe any takeover premium that is in the stock will likely
be given back, as this move signals E*Trade's board's desire to
remain independent."
Since Mr. Freiberg's dismissal, Mr. Petrilli has led the company
on an interim basis. In the fall, he told investors that he wasn't
a candidate for the top job at E*Trade, adding that the company was
looking for a four- to seven-year commitment.
In October, The Wall Street Journal, citing people familiar with
the matter, said Knight Capital Group Inc. (KCG) Chief Executive
Thomas Joyce had held preliminary talks about E*Trade's CEO job.
Knight, though, agreed to be acquired by Getco LLC for $1.8 billion
in December, in a deal that will make Mr. Joyce executive chairman
of the combined company.
E*Trade's CEO position has been a revolving door over the past
five years as Mr. Freiberg had succeeded Robert Druskin, another
Citi veteran, who had served as interim CEO for only a few months.
Mr. Druskin followed Donald Layton, who departed after less than
two years on the job.
Mr. Layton's tenure followed a short stint by interim CEO
Jarrett Lilien, the company's former COO, who led E*Trade after
Mitch Caplan was ousted in 2007.
E*Trade has been struggling for more than five years to recover
from bad bets made on the U.S. housing market. The company was
twice rescued by hedge fund Citadel LLC, which helped shore up
E*Trade's capital position. Citadel led a group that pumped about
$2.5 billion of cash into E*Trade in 2007 and later injected the
majority of a $1.7 billion debt exchange about two years later.
Mr. Trone said Mr. Idzik likely has his work at E*Trade cut out
for him as the company, along with its rivals, is suffering from
both low interest rates and weak trading volumes. For E*Trade
though, the legacy loan portfolio "remains a key overhang for the
firm," he said.
In its statement announcing Mr. Idzik's hire, E*Trade said
Rodger Lawson will step down as the company's lead independent
director, a role he has filled since August. He no longer needed to
serve in that position as Mr. Petrilli will continue working solely
as E*Trade's chairman.
News of E*Trade's move to name Mr. Idzik as its CEO was reported
earlier Thursday by The Financial Times.
E*Trade will report fourth-quarter results next Thursday.
Write to Brett Philbin at brett.philbin@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires