Charles Schwab Makes Bid to Buy Back Brokerage

Charles R. Schwab, founder and chairman of the discount stock brokerage firm that bears his name, has submitted a proposal to buy back the firm from ailing BankAmerica, a Schwab spokesman said Thursday.

Terms were not disclosed, although the offer is believed to be below BankAmerica’s asking price of about $400 million.

“It is a proposal that we hope will serve as a basis for further discussion,” said Hugo W. Quackenbush, Charles Schwab & Co.’s senior vice president for marketing.

A BankAmerica spokesman declined to comment, although the company said last month that Schwab, one of the nation’s largest discount brokerages, is for sale and that a deal is likely to close in the first quarter of 1987.

BankAmerica, parent of Bank of America, has been been feverishly selling off assets both to offset its huge operating losses and to fend off an unwanted takeover bid from First Interstate Bancorp of Los Angeles.

The 49-year-old Schwab sold the brokerage to BankAmerica in 1983 for stock worth about $50 million, though the bank has since invested considerable capital to expand the firm. He is likely to have plenty of competition in his effort to buy it back. Salomon Bros., BankAmerica’s investment banker, has prepared a list of 40 to 50 possible buyers that is said to include major banks, savings and loan firms, insurance companies and brokerage firms.

Schwab has argued that banks should be ruled out as possible buyers because federal regulations limit the range of services that bank-owned brokerages may offer.

Schwab and his supporters also contend that he is uniquely suited to oversee the firm’s continued growth. “We get literally a 100% better response to advertisements when Chuck’s picture appears in an ad,” Quackenbush said Thursday.

Schwab, who lacks the personal wealth to mount a bid alone, is believed to have enlisted a group of investors to back his proposal.

Charles Schwab & Co. has 94 offices in the United States and overseas, 2,000 employees and 1.5 million customers. Unlike its parent, the unit has been operating profitably and expects to report net income this year of about $26 million on revenue of $235 million.