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Stifel-Sterne Agee Deal Is a Go for $150M

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Stifel Financial confirmed late Monday that it is indeed buying broker-dealer Sterne Agee Group, as had been reported widely on Friday. The firm, which also shared its latest earnings, says it will buy Sterne Agee for about $150 million in cash and stock.

The St. Louis-based firm said it had fourth-quarter earnings of $58.4 million, or $0.75 per share, $0.03 below analysts’ estimates. Revenue for the quarter was $578.1 million vs. the consensus estimate of $581.6 million.

“We have identified a great firm in Sterne Agee to bolster our Global Wealth Management group with the addition of more than 700 financial advisors and independent representatives, increasing advisor professionals by 35%,” said Stifel CEO & Chairman Ron Kruszewski, in a press release.

“Sterne Agee’s fixed-income platform is highly complementary to our existing products and services, and together will catapult this business to a new level, continuing the momentum we established with the addition of Knight’s fixed income sales and trading business,” he explained. “This acquisition furthers our goal of creating a balanced, well-diversified business mix with wealth management and institutional exposure.”

Stifel has 1,965 employee advisors and 138 independent reps in its Century Securities unit; the company’s global-wealth business has nearly $187 billion in assets under management. Sterne Agee includes 130 private-client advisors with some $10 billion in client assets and over 600 independent reps with $10 billion in client assets.

If all reps and all assets stay after the merger, Stifel will have some 2,095 employee advisors, 738 independent reps and $200 billion of AUM. It has set aside some $58 million for retention packages as part of the deal.

Excluding firms with large groups of independent reps, like LPL Financial (LPLA), Ameriprise Financial (AMP), Cetera Financial (RCAP) and Ladenburg Thalmann (LTS), Stifel says it now is the sixth-largest advisor force in the U.S., behind the four wirehouse firms and Raymond James Financial (RJF). Including these four largely independent broker-dealers, Stifel is the 10th biggest advisor group.

As part of the announced deal, Stifel and Sterne Agee say they will sell the FBC Mortgage business back to its founders. Stifel also plans for Sterne Agee’s institutional equity and investment-banking business unit to operate on a standalone basis; it may find a partner for it or spin it off.

The deal with Stifel comes after a turbulent period for the Birmingham, Alabama-based broker-dealer.

In May, Sterne Agee CEO James Holbrook Jr. and his son William, who served as the firm’s chief operating officer, were asked to leave the firm, after they came under investigation by the U.S. Treasury and Justice Department over the possible misused of company assets. In December, Sterne Agee sued its former CEO.

— Check out Sterne Agee Takes Ex-CEO to Court Over Luxury Spending on ThinkAdvisor.

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