JMC Group Inc., a beleaguered company that helps banks run their brokerages, has scrapped a merger deal that stock analysts described as the company's last hope.
The San Diego-based investment marketing firm said Tuesday that it has terminated a definitive merger agreement with USBA Holdings Ltd., a privately held company in Atlanta that provides consulting and auditing services to more than 1,000 community banks.
"The JMCG board concluded that, based upon information now available to the board, the proposed combination is not in the best interests of JMCG's stockholders," the company said in a statement.
JMC did not elaborate, and its chairman and founder, James Mitchell, did not return telephone calls.
JMC's stock price plummeted $1.375 to $1.625 at Tuesday's close. On Wednesday it opened at $1.75. When Mr. Mitchell had announced his merger plans in April the stock price soared to $3, after languishing for many months near $1.
One analyst called the move "disappointing" but said all is not lost for JMC. An important marketing arrangement that the company signed with USBA remains intact, said David M. West, an analyst at Davenport & Co., a Richmond securities firm.
JMC paid $1.25 million to gain access to USBA's client list. JMC also offered USBA one million common stock warrants exercisable in one year, which would potentially give USBA one-eighth of the ownership of JMC.
The marketing arrangement "remains the key," to JMC's survival, Mr. West said. "They have strategically made the right decision to go after small banks, but the jury is still out."
JMC's troubles began a few years ago as the large-bank market began drying up.
The company depended on only six large bank clients - including Jacksonville, Fla.-based Barnett Banks Inc. - for its revenues. But these institutions have brought their brokerages in-house, including Barnett, which at one time had contributed 75% of the company's total sales.
The latest bank to follow suit was Central Fidelity Banks Inc., which ended a four-year relationship with JMC in July. Mr. Mitchell has kept his company alive in part by selling the contracts of brokers employed by him to his bank clients.
Ronald Wallace, chief executive at USBA, was expected to takeover the same role at JMC. Mr. Mitchell was to remain as chairman. Mr. Wallace did not return a telephone call to his office.
