Stifel Financial Corp. (NYSE: SF) and KBW, Inc. (NYSE: KBW) on Nov. 5 announced they have entered into a definitive merger agreement to create the premier middle-market investment bank with a specialized focus on the financial services industry.
Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, KBW shareholders will receive $17.50 per share, comprised of $10 per share in cash and $7.50 per share in Stifel common stock. Additionally, holders of certain restricted KBW shares, that will continue to vest post closing, will receive $17.50 in Stifel common stock. The stock component of the consideration is fixed at $7.50 per share, subject to a collar, provided that the volume weighted average closing price of Stifel common stock for the 10 days prior to closing is between $29 and $35 per share. If the volume weighted average price rises above $35 per share, the exchange ratio will be fixed at 0.2143 shares of Stifel common stock for each share of KBW, and if it falls below $29 per share, the exchange ratio will be fixed at 0.2586 shares of Stifel common stock for each share of KBW.
The transaction is valued in excess of $575 million, which includes the outstanding shares and restricted stock awards of KBW. Approximately $250 million in excess capital on KBW’s balance sheet is expected to be immediately available to Stifel upon closing.
“This transaction is expected to be accretive to shareholder value,” Ronald J. Kruszewski, chairman, president and CEO of Stifel Financial Corp. said. “This merger with KBW, a premier, specialized financial services firm, provides Stifel with an exciting opportunity to grow and become a market leader in the financial services sector. Our shared culture and platforms are highly complementary, and this combination expands our capabilities at a time when we believe the financial services sector is poised to benefit from improving fundamentals. I am confident our clients will benefit from our expanded services and expertise.”
“This merger will allow KBW to focus on its strengths in the financial services sector while offering clients a greatly expanded array of products and services through the Stifel platform,” Thomas B. Michaud, president and CEO of KBW, said. “KBW’s deep roster of client relationships will be supported by a strong institutional business and global wealth management business. With little overlap, this merger will provide a significant opportunity to grow our combined companies’ market share.”
The combined company will provide investment banking, sales and trading, and research in the financial services vertical through KBW’s Keefe, Bruyette & Woods broker-dealer subsidiary, which will continue to operate as an independent subsidiary of Stifel following completion of the transaction. Stifel will utilize KBW’s preeminent market brand as a highly focused, specialized financial services platform of choice.
Stifel has identified significant synergies that will leverage the integrated platforms and take advantage of Stifel’s robust global wealth management capabilities. Annualized net revenues for the two companies are approximately $1.8 billion, based upon 2012 results through September 30.
The merger is subject to approval by KBW shareholders and customary regulatory approvals. Thomas Michaud will join Stifel’s board and management team upon completion of the merger and will remain Chief Executive Officer of the KBW business unit.
Stifel was advised by its own wholly-owned subsidiary, Stifel, Nicolaus & Company, Incorporated and was represented by Bryan Cave LLP. Stephens Inc. rendered a fairness opinion to the board of directors of Stifel Financial Corp. KBW was advised by its own wholly-owned subsidiary, Keefe, Bruyette & Woods, Inc., and BofA Merrill Lynch, and was represented by Sullivan & Cromwell LLP.
Stifel Financial Corp. is a financial services holding company headquartered in St. Louis, which conducts its banking, securities and financial services business through several wholly-owned subsidiaries. Stifel clients are served through Stifel, Nicolaus & Company, Incorporated in the United States, through Stifel Nicolaus Canada Inc. in Canada, and through Stifel Nicolaus Europe Limited in the United Kingdom and Europe. The company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory and related financial services to individual investors, professional money managers, businesses and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. offers trust and related services.
KBW, Inc., headquartered in New York, operates in the United States, Europe and Asia through its broker dealer subsidiaries, Keefe, Bruyette & Woods, Inc., Keefe, Bruyette & Woods Limited and Keefe, Bruyette & Woods Asia Limited. Celebrating its 50th anniversary, KBW has established itself as a leading independent authority in the banking, insurance, brokerage, asset management, mortgage banking, real estate and specialty finance sectors. Founded in 1962, the firm maintains industry-leading positions in the areas of research, corporate finance, mergers and acquisitions as well as sales and trading in equities and debt securities of financial services companies.