Rejected: SWS shoots down Sterne Agee acquisition offer

Less than 24 hours after revealing that they had received an unsolicited takeover proposal from the Sterne Agee Group Inc., officials for SWS Group Inc. — a Dallas-based firm with several hundred advisers—unanimously rejected the offer. In a letter to Sterne Agee chairman and chief executive James Holbrook issued today, SWS chairman Don Buchholz called Sterne Agee’s offer “highly conditional” and “opportunistic.” Mr. Buchholz stated that the board of directors at SWS considered the offer — which Sterne Agee delivered late Wednesday, after several previously offers were rebuked by SWS — but ultimately determined that the offer of $6.25 a share “substantially undervalues” the company’s future potential. In total, the Sterne Agee offer would have valued SWS at roughly $203 million. Mr. Buchholz also noted in his letter that he and other executives at SWS “do not appreciate the distracting, interfering and unprofessional communications from Sterne Agee employees to SWS Group employees regarding this proposal and respectfully request that those communications cease immediately.” A spokesman for SWS declined to offer any specific details on the nature of these communications. William Holbrook, chief operating officer at Birmingham, Ala.-based Sterne Agee, declined to comment on the rejected offer or the claims in Mr. Buchholz’s letter. The combination of Sterne Agee and SWS would have created a regional broker-dealer with more than 800 financial advisers and brokers. Sterne Agee's independent-broker-dealer arm had 252 reps as of Sept. 30, according to the InvestmentNews Broker-dealer Data Center. That ranked the firm as the 78th-largest independent broker-dealer in the most recent InvestmentNews survey. (See the full ranking at The largest independent broker-dealers ranked by total reps.) However, Sterne Agee has managed to boost its rep count at a greater clip than most independent broker-dealers over the last year and ranked as the 17th-fastest-growing IBD, with a 14.5% increase. (See the ranking of the Fastest-growing independent broker-dealers.)