Leading Investor Group To Acquire Majority Stake In Datek Online Holdings

Island ECN to be Spun Off As Separate Company

12/01/00 - A group of prominent investment firms, led by Bain Capital and featuring TA Associates and Silver Lake Partners, has completed an agreement to invest $700 million to acquire a majority interest in both Datek Online Holdings Corp., which operates one of the nation's most innovative online brokers, and The Island ECN, Inc., a technology leader in alternative trading systems. The investment is the largest private equity investment in an online financial services firm.

Datek Online Holdings will acquire all voting shares of stock held by a group of original shareholders, including former Chief Executive Officer Jeffrey Citron. Current management, led by Ed Nicoll, Chairman and Chief Executive Officer of Datek Online Holdings Corp., and the investment group will now own 100 percent of the voting control of Datek Online Holdings.

As part of the transaction, The Island ECN will be spun off as a separate company. Island's Board of Directors will consist of current management and members of the investment group.

"We are pleased that three of the nation's most prestigious and respected private investment firms have endorsed the business models of both Datek and Island," Mr. Nicoll said. "Our new partners will put us in a strong position to build on the many successes that we have already achieved." Mr. Nicoll added that the investment also provides the capital needed to develop new products and expand into new areas.

"Datek and The Island ECN enter a new chapter in their growth and innovation through this investment, operating as independent businesses with strong, focused management teams," said Steve Pagliuca of Bain Capital. "Datek has the technology and the resources to build on its current position as a leader in the online investment field and to elevate the standards for serving retail investors."

Kevin Landry of TA Associates said, "We are excited and pleased to be a part of the evolution of Datek and Island as they continue blazing the trail for the securities industry. Datek Online has one of the most loyal and knowledgeable groups of customers in the online investing field. That's due to the hard work and superior innovation consistently displayed by Ed Nicoll, Matt Andresen, and their management teams."

Roger McNamee of Silver Lake Partners said, "Datek and Island's ability to increase market share in a difficult environment has proven the strength of their business models. For the last two quarters, Datek Online's brokerage unit has been growing at a faster rate than any of its major competitors. Island has been taking market share and significantly increasing its trading volume. Both Datek Online and Island are the technology leaders in their respective segments. This is the right team, with the right Internet technology at exactly the right time to transform the brokerage industry. Silver Lake is delighted to join the Datek team as it delivers the fairest, most reliable and most innovative services to knowledgeable investors."

Greg Smith, senior research analyst at Chase H&Q, noted, "Datek Online and Island are among the elite of the online financial services industry. Over the past few quarters, despite a difficult market environment, their innovative and powerful business models have allowed them to continue to stand out in a crowded field."
Credit Suisse First Boston Technology Group acted as placement agent in this transaction.

About Datek Online Holdings Corp.
Established in 1998, privately held Datek Online Holdings Corp. is one of the fastest-growing financial services companies in the United States and through affiliates provides swift access to financial services through innovative technology. The Company's primary businesses are Datek Online Brokerage Services LLC, a pioneer in the online brokerage industry; iClearing LLC, a securities clearing operation; and Watcher Technologies LLC, a provider of cutting-edge trading systems for the professional trading industry.

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