Stifel to acquire Sterne Agee for $150 million

Stifel Financial Corp. on Monday said it had entered into an agreement to acquire the privately held Sterne Agee Group Inc. for $150 million in cash and stock. The acquisition will increase Stifel's wealth management group with the addition of 730 employee and independent contractor reps and advisers who control more than $20 billion in client assets. The acquisition will also complement Stifel's fixed income platform, the company said in a statement. The acquisition will increase the number of Stifel's wealth management advisers by 35% to more than 2,800, the company said. It will also provide Stifel with a surer footing in the independent adviser channel; Stifel has only 188 advisers in the independent model through its Century Securities Associates Inc. subsidiary. (More: Stifel deal for Sterne Agee would beef up IBD ranks) Along with the enhancements to its fixed-income trading, Stifel will also acquire a private trust company and one of the 10 largest clearing firms in the U.S. with over $27 billion in assets under custody. The acquired businesses are expected to generate about $300 million to $325 million in gross annual revenues when fully combined with Stifel. The potential deal between Stifel and Sterne Agee was first reported last Friday by Bloomberg News. “This acquisition furthers our goal of creating a balanced, well-diversified business mix with wealth management and institutional exposure,” said Ronald Kruszewski, chairman and CEO of Stifel, in a statement. The merger is expected to close in late spring. Sterne Agee has been under a cloud for most of the past year. Last May, the firm ousted its chairman and chief executive, James Holbrook Jr., for allegedly misusing company assets and spending lavishly on perks. The board took action after it learned of a federal criminal investigation into possible misconduct by the CEO. Then, in December, Sterne Agee sued Mr. Holbrook, for the same reason: allegedly using company assets and resources in activities that were not in Sterne Agee's best interest but were, instead, in Mr. Holbrook's personal interest. In 2015, high costs of technology and compliance are expected to continue to force small broker-dealers to sell to large firms that have the scale to afford the bells and whistles broker-dealers need to compete.