Stifel agrees merger with Sterne Agee

Lanes Merge Road Sign

Stifel Financial Corp have announced that it has entered into a definitive merger agreement to acquire Sterne Agee Group, one of the oldest and largest privately owned financial services firms in the nation.

Sterne Agee bolsters Stifel’s Global Wealth Management segment with the addition of approximately 730 financial advisors and independent representatives nationwide managing over $20bn in client assets, and complements Stifel’s Fixed Income platform, adding depth and capabilities.

Strategic highlights include:

 Increases Stifel’s Global Wealth Management professionals by 35% to more than 2,800.

 Investment in the independent advisor business provides Stifel a platform to grow this channel.

 Complements Stifel’s fixed income capabilities with the addition of more than 200 professionals with minimal overlap between the platforms.

 Enhances Stifel’s current fixed income depository practice with the integration of Sterne Agee’s robust Sales, Trading, and Strategies group focused on the needs of community and regional depository institutions. Sterne Agee currently enjoys status as an endorsed provider of the Corporation for American Banking, a subsidiary of the American Bankers Association.

 A private trust company offering a full range of trust services, including: Investment Management, Estate Administration, Personal and Charitable Trusts, and Retirement Planning.

 Top 10 clearing firm in the U.S., with over $27bn in assets under custody.

The acquired businesses are expected to generate approximately $300 to $325m in gross annual revenues and be accretive to shareholder value when fully integrated.

The transaction values Sterne Agee at approximately $150m. The closing consideration consists of a combination of Stifel common stock, valued at $51.55 per share, and cash. Depending on shareholder elections, the minimum amount of Stifel stock issued at closing is 1.42 million shares and the maximum amount issued is 1.62 million shares. Accordingly, the cash consideration will range from approximately $77m to $66m.

Stifel and Sterne Agee have agreed with the founders of the FBC Mortgage business to sell the business back to them. In addition, Sterne Agee has built a leading Institutional Equity and Investment Banking business. Stifel has committed to Sterne Agee and the professionals in Sterne Agee’s Institutional Equity and Investment Banking business to operate it on a stand-alone, independent basis. Stifel and Sterne Agee management believe that there is significant value in this business and have been approached by a number of suitable partners for the business and its professionals. Working together with these employees, Stifel is committed to finding the right partner, or, alternatively, considering all other strategic alternatives, including spinning off the Institutional Equity and Investment Banking business as a separate stand-alone entity.

“We have identified a great firm in Sterne Agee to bolster our Global Wealth Management group with the addition of more than 700 financial advisors and independent representatives increasing advisor professionals by 35%. Sterne Agee’s fixed income platform is highly complementary to our existing products and services, and together will catapult this business to a new level, continuing the momentum we established with the addition of Knight’s fixed income sales and trading business,” said Ronald J. Kruszewski, Chairman and CEO of Stifel. “This acquisition furthers our goal of creating a balanced, well-diversified business mix with wealth management and institutional exposure.”

Eric Needleman, Chairman, Sterne Agee Group, Inc. and CEO of Sterne Agee & Leach, Inc., stated, “Sterne Agee has been fortunate to experience growth and success for more than a century. We believe that the time is right to merge our company with Stifel to allow our shareholders, clients and employees the opportunity to continue to prosper in the ever-challenging financial services arena. Our goal of being a preeminent financial services company has not changed, but we are accelerating this plan by joining together with a like-minded company with a similar legacy.”

The merger is subject to approval by Sterne Agee shareholders and is expected to close in the late spring, subject to regulatory approvals and customary conditions. The boards of directors of both companies unanimously approve the merger.

Stifel’s lead advisor was its own wholly owned subsidiary, Keefe, Bruyette & Woods, Inc., and was represented by Bryan Cave LLP. BofA Merrill Lynch rendered a fairness opinion to the board of directors of Stifel Financial Corp. Sterne Agee was advised by Sandler O’Neill + Partners, L.P., and was represented by Wachtell, Lipton, Rosen & Katz.

JefferiesAnd the Best Place to Work in the global financial markets 2016 is...

Register for Financial Markets News Alerts