updated 9/29/2005 7:48:51 AM ET 2005-09-29T11:48:51

Online brokerage E-Trade Financial Corp. said Thursday it will buy BrownCo, an online brokerage service of JPMorgan Chase & Co., for $1.6 billion in cash.

The company said BrownCo’s 200,000 customers have the second-highest average account balances in the industry, exceeding $145,000 per account. E-Trade said it will gain $29 billion in assets, $3.4 billion in customer cash and approximately 28,000 daily average revenue trades.

“BrownCo is a premier brokerage asset and an ideal strategic fit for E-Trade Financial, accelerating the build out of our business model in this fast-consolidating industry,” Mitchell H. Caplan, chief executive officer of E-Trade, said in a statement.

After the deal closes, E-Trade will have nearly 4.3 million customer accounts, $160 billion in customer assets, total customer cash and deposits of $27 billion, more than $6.2 billion in average margin debt and about 160,000 daily average revenue trades.

E-Trade said the transaction will deliver pretax savings of about $154 million, including $91 million in cost savings and $63 million in revenue synergies.

E-Trade said it will finance the transaction through about 65 percent to 75 percent in common equity and mandatory convertible securities, with the rest coming from proceeds of senior notes.

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