Private-equity funds continue to show interest in small to midsize financial services firms — this time with a PE buyer snapping up a small clearing firm and a holding company for independent broker-dealers with a penny stock price.
COR Securities Holdings Inc. said yesterday it had acquired Legent Clearing LLC, which is based in Omaha, Neb., and has 75 broker-dealer clients. At the same time, COR Securities said it had made an offer to National Holdings Corp., which controls two independent broker-dealers with close to 700 reps and advisers, to buy $10 million of the firm's preferred stock.
COR Securities and National Holdings have two months to reach an agreement, according to filings with the Securities and Exchange Commission; COR Securities' offer is for 100,000 shares of newly issued National Holdings' convertible preferred stock. The conversion price is 55 cents per share.
National Holdings' current price per share is 39 cents as of today, giving it a market capitalization of slightly less than $8 million. That has nearly doubled since Friday, when it traded at 20 cents per 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 chief executive Steven Sugarman wrote yesterday in a letter to National Holdings' board of directors. “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's transactions have a history of doing business with each other. Legent is one of the clearing firms used by both National Securities and vFinance.
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 only clears about 10% of National Holdings' broker-dealer business, said Mr. Frankel, who also is on the board of COR Securities.
National Securities CEO Mark Goldwasser did not return a call by 2 p.m. EST seeking comment on the transaction.
COR Securities is the financial services portfolio holding company of COR Capital LLC, a
private equity firm.
COR Capital spokesman Cameron Wald also did not return a call by 2 p.m.
As a result of the transaction, Legent's equity capitalization initially has been increased by about $20 million.
And COR Capital also announced 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. Also joining the firm's board is Marshall Geller, former senior managing director at Bear Stearns Cos. Inc., and Ric Duques, former chairman and CEO of First Data Corp.
Legent 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 ran into trouble and was closed by regulators.
