Investor Phillip Frost, the largest shareholder in and chairman of Ladenburg Thalmann Financial Services Inc., issued a challenge Friday to the independent-brokerage business, saying that the firm's plans to expand are second to none.
“It is worth noting that our commitment to growth in the independent-brokerage business is without equal,” he wrote in a letter to the firm's shareholders.
Mr. Frost's fortune, made primarily in the pharmaceutical business, is $2.2 billion, according to Forbes. Last year, Forbes ranked him the world's 437th richest man.
In line with the firm's growth plans, Ladenburg Thalmann in August agreed to buy Securities America Inc. for $150 million plus considerations from
Ameriprise Financial Inc.
It was Ladenburg Thalmann's third significant acquisition of an independent broker-dealer since 2007, Mr. Frost said.
Although three large, independent broker-dealers have been bought recently by private-equity firms, he said that Ladenburg Thalmann was the buyer of the three other large firms were on the block in the past five years: Securities America; Investacorp Inc. in 2007; and, a year earlier, Triad Advisors Inc.
“We are the strategic player in our industry, committed for the long term to building an industry-best platform to drive profitable growth for our advisors and for the company,” Mr. Frost wrote.
Once the Securities America transaction is completed, more than 2,700 independent representatives and financial advisers will be affiliated with firms under the Ladenburg Thalmann umbrella, making it one of the largest independent-broker-dealer networks in the country, he wrote.
Mr. Frost, 74, is very high on what owning Securities America means to Ladenburg Thalmann and its shareholders.
“The Securities America transaction is truly a transformative event for Ladenburg,” he wrote.
Mr. Frost owns 31.4% of Ladenburg Thalmann stock.
The firm last year reported revenue of $195 million and a loss of $11 million. The acquisition of Securities America, which typically generates more than $400 million in revenue per year, adds significantly to Ladenburg Thalmann's top line.
The firm's goal is to place its independent-broker-dealer operations side-by-side with its institutional business, Mr. Frost wrote in the letter.
“Since 2007, our plan has been to marry the stable and recurring revenues of the independent-brokerage business with the more volatile but potentially very profitable investment banking/capital markets businesses, and we are pleased to report that it is working very well,” he wrote.
Revenue from independent broker-dealers will act as a cushion for Ladenburg Thalmann's investment banking operations, Mr. Frost wrote.
“Our goal has been to build sufficient scale in our independent-brokerage business, with the accompanying steady cash flows it produces, so, regardless of capital markets conditions, we as a firm can generate sufficient operating cash to create value for our shareholders,” he wrote.
