Stifel Financial (SF) in St. Louis has agreed to buy KBW (KBW) for more than $575 million in cash and stock.
KBW has taken steps to reduce its headcount as it has struggled the last two years. In 2011 it lost $31.7 million, and on Monday it announced that it had lost $5.2 million for the third quarter and $10.1 million for the first nine months of the year.
KBW’s Chief Executive Thomas Michaud told American Banker in the June that he wanted to “build the most valuable company I can. And if somebody chooses to acquire the company, I want to make sure they pay the highest and fairest price possible.”
New hires and preparations for an anticipated wave of bank mergers have fueled Stifel Nicolaus, the investment banking arm of Stifel Financial, having its best bank M&A results since 2007.
Stifel posted on Monday third-quarter income of $37.7 million, up roughly 69% from a year earlier.
Under the agreement, KBW shareholders would receive $17.50 per share, which would include $10 per share in cash and $7.50 per share in Stifel common stock. Additionally, holders of certain restricted KBW shares, which would continue to vest after the deal closes, would receive $17.50 of Stifel common stock for each of them.
The stock component of the deal is fixed at $7.50 per share, provided that the volume-weighted average closing price of Stifel common stock for the 10 days before closing is between $29 and $35 per share. If the volume-weighted average rises above $35 per share, the exchange ratio would be fixed at 0.2143 shares of Stifel common stock for each share of KBW. If it falls below $29 per share, the exchange ratio would be fixed at 0.2586 shares of Stifel common stock for each share of KBW.
Roughly $250 million in excess capital on KBW’s balance sheet is expected to be immediately available to Stifel upon closing, the companies said Monday.
The combined company would provide investment banking, sales and trading and research to the financial services industry through KBW’s Keefe, Bruyette & Woods broker-dealer unit, which would continue to operate as an independent subsidiary of Stifel.
Michaud would join Stifel’s board and management team after the deal closes and would remain as CEO of the KBW business unit.
Stifel was advised by its own unit, Stifel, Nicolaus & Co., and was represented by Bryan Cave. Stephens rendered a fairness opinion to the board of directors of Stifel Financial. KBW was advised by its own Keefe, Bruyette & Woods and BofA Merrill Lynch and was represented by Sullivan & Cromwell.