Independent broker-dealer merger-and-acquisition activity continued its steady pace in 2016 as National Holdings Corp. said Thursday that it had reached an agreement to be acquired by Fortress Biotech Inc., a biopharmaceutical company that develops novel pharmaceutical and biotechnology products.
National Holdings, with the ticker NHLD, is the parent of two independent broker-dealers, National Securities Corp. and vFinance Investments Inc.
With $163 million in total revenue last year, National Securities and its affiliates ranked 33rd on the
InvestmentNews list of top independent broker-dealers as ranked by 2015 revenue. National Holdings has 651 affiliated registered reps and advisers who earned an average payout of $164,000 last year, according to the survey.
“We have worked closely with NHLD over the years and believe strongly in the people, their overall business and in particular their unique ability to finance emerging biotech companies,” Michael Weiss, vice chairman of Fortress Biotech and former chairman of NHLD, said in a press release.
Through a subsidiary, Fortress Biotech is offering NHLD shareholders $3.25 per share in cash, which represents a 44% premium over the Wednesday closing price, according to Fortress.
With 12.44 million shares outstanding, the total offering price is $40.4 million. That translates into close to 25% of NHLD's annual revenues, which is on the low end of pricing for independent broker-dealers.
If more than 80% of the NHLD shares are tendered in the offer, NHLD will undergo a merger and will no longer be a public company, according to the statement. If less than 80% are tendered, NHLD will remain a publicly traded company. In that event, shareholders will receive from NHLD a five-year warrant for each share they hold to purchase an additional share of NHLD common stock at $3.25.
NHLD's board of directors
has approved the merger agreement and is remaining neutral on whether shareholders should accept. The standard approval of the deal by the
Financial Industry Regulatory Authority Inc. is pending.
National Securities has been active in the initial public offering market for small, biotech start-ups. Along with a retail financial advice platform, the firm offers investment banking and institutional sales and trading.
2016 has seen a flurry of independent broker-dealer deals, with traditional owners of broker-dealers, typically insurance companies, selling to
private equity firms or other insurance companies.
DOL RULE, AIG
The Department of Labor's new fiduciary rule, which affects IRA rollovers, has been widely acknowledged as hastening the departure of insurance companies from the retail financial advice industry.
In January, American International Group Inc. said it was selling AIG Advisor Group to private-equity firm Lightyear Capital and Canadian pension manager PSP Investments. At the end of February,
MetLife Inc. said it was selling its U.S. adviser unit to Massachusetts Mutual Life Insurance Co.
And NFP Corp., a leading insurance broker and consultant, said this month it was selling a majority stake in its independent broker-dealer, NFP Advisor Services, to funds managed by private-equity shop Stone Point Capital. NFP Advisor Services is changing its name to Kestra Financial.
