Private-equity firm takes aim at small players in B-D space

COR buys Legent, bids for holding company of two indie brokers

Jan 8, 2012 @ 12:01 am

By Bruce Kelly

Private-equity funds continue to show interest in small to midsize financial services firms — this time with such a buyer snapping up a small clearing firm and making a bid for a holding company for independent broker-dealers with a penny stock price.

COR Securities Holdings Inc. said last week that it had acquired Legent Clearing LLC, which is based in Omaha, Neb., and has 75 broker-dealer clients. At the same time, COR Securities Holdings said that it had made an offer to National Holdings Corp., which controls two independent broker-dealers with nearly 700 representatives and financial advisers, to buy $10 million of the firm's preferred stock.

COR Securities Holdings and National Holdings have two months to reach an agreement, according to filings with the Securities and Exchange Commission.

COR Securities Holdings' offer is for 100,000 shares of newly issued National Holdings' convertible preferred stock. The conversion price is 55 cents a share.

National Holdings' price per share was 39 cents as of last Wednesday, giving it a market capitalization of slightly less than $8 million. That had nearly doubled since Dec. 30, when it traded at 20 cents a share.

National Holdings has two independent broker-dealers, National Securities Corp. and vFinance Investment Inc., under its umbrella.


“We believe this transaction represents a compelling opportunity for National Holdings and its shareholders,” COR Securities Holdings chief executive Steven Sugarman wrote last week in a letter to National Holdings' board. “Upon the closing of this transaction, National Holdings will be well-positioned to execute its growth mandate in a profitable, sound manner.”

The companies involved in COR Securities Holdings' transactions have a history of doing business with one another. Legent is one of the clearing firms used by both National Securities and vFinance Investment.

Legent Clearing CEO Chris Frankel said: “It's a really positive transaction for our clients and employees at Legent. This gives us stability to move forward and take advantages of opportunities in the marketplace.”

Legent clears only about 10% of National Holdings' broker-dealer business, said Mr. Frankel, who also is on the board of COR Securities Holdings.

National Securities CEO Mark Goldwasser didn't return a call seeking comment.

COR Securities Holdings is the financial services portfolio holding company of COR Capital LLC, a private-equity firm.

COR Capital spokesman Cam-eron Wald also didn't return a call seeking comment.

As a result of the transaction, Legent Clearing's equity capitalization initially has been increased by about $20 million.

And COR Capital also an-nounced additions to senior management that bolster its standing in the business of clearing for broker-dealers, which has been under pressure due to low interest rates' eating into profit centers such as lending and margin accounts.

Former Pershing LLC chairman and CEO Alton Jones is joining the board of COR Securities Holdings. Also joining the firm's board is Ric Duques, former chairman and CEO of First Data Corp., and Marshall Geller, former senior managing director at The Bear Stearns Cos. Inc.

Legent Clearing has been on the block for some time. It was set to be purchased by United Western Bank in June 2010 for $13 million before the bank was closed by regulators.


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