Consolidation plays in the securities industry continue to build, with regional broker-dealer and clearing firm Sterne Agee & Leach Inc. making an ‘unsolicited' offer to buy SWS Group Inc..
Sterne Agee of Birmingham, Ala., offered to buy SWS of Dallas for $203 million in cash, or $6.25 per share, SWS confirmed in a statement today.
Shares of SWS have soared in trading on the news, rising more than 25% intraday to $6.20 per share.
In the statement, SWS said its board of directors would review the conditional proposal and determine its course of action.
Sterne Agee has circled SWS in the past, with SWS spurning an offer, according to a statement Thursday afternoon by the latter company. SWS added in the statement that it “has previously received a number of letters from Sterne Agee expressing its interest in a potential transaction.”
“SWS Group's board of directors, after careful consideration of financial and legal advice, unanimously determined that these previous proposals were not in the best interests of SWS Group or its shareholders,” the statement continued.
Combined, the two would form a substantial regional broker-dealer. The two would create a combined firm with some 800 reps and $750M in total revenue.
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.)
SWS has been struggling of late. For the six-months period through December, it posted a net loss of $21.1 million, or 65 cents per diluted share, on net revenue of $188 million. That's compared with net income of $9 million, or diluted earnings per share of 32 cents, on net revenue of $194.6 million for the first half of fiscal 2010. The overwhelming part of that loss took place in the quarter that ended in September.
And in December, it suddenly canceled a $95 million debt offering. The offering, which was to be underwritten by
Bank of America Merrill Lynch, was canceled “due to recent volatility and unfavorable market conditions,” SWS said in a statement.
That announcement came roughly two months after the company's chief financial officer and treasurer, Kenneth Hanks, resigned and four months after its president and chief executive, Donald Holtgren, stepped down to pursue other interests.
Consolidation in the securities industry is on the increase. This month, Theodore E. “Ted” Charles, founder and chairman of Investors Capital Corp., in a filing with the Securities and Exchange Commission said he was selling his 54.6% stake in the company. Investors Capital has 566 independent-contractor reps and advisers.
