CHICAGO -- Minneapolis-based Dain Bosworth Inc. said yesterday it signed a definitive agreement to acquire Chicago-based Clayton Brown & Associates for an expected cash price of $25 million.

The deal, which has been in the works for months, is subject to approval by regulators and Clayton Brown's employee stockholders.

Nelson D. Civello, Dain Bosworth's executive vice president and director of the fixed-income group, said the boards of directors of both Dain Bosworth and its parent company, Inter-Regional Financial Group, have already approved the acquisition.

Clayton Brown employees were told of the acquisition on Wednesday afternoon.

Civello said stockholder voting will probably take place early next month. An employee trust holds 55% of the company's stock, while Brown owns 30% and individual employees own the remaining 15%. Dain Bosworth plans to complete the deal shortly following the vote.

The acquisition comes during hard times for the fixed-income market. Both Clayton Brown and Dain Bosworth are involved in public finance and in the trading, underwriting, and distribution of tax-exempt debt.

Clayton Brown, chairman of his namesake firm, said yesterday the acquisition process began in March when a firm official received an "informal overture" from Dain Bosworth.

A slowdown in business was a factor in agreeing to negotiate with Dain Bosworth, Brown said. Business has been "substantially down" from 1993, and the first quarter of the firm's fiscal year that began July 1 was "tough." he said.

"Maybe a year ago, when we had the best time the business had ever seen, we might have decided not to proceed," Brown said. "Certainly, the [current] Conditions made us amenable to beginning negotiations."

Civello said that while Dain Bosworth recognizes "business is not good anywhere," the from felt the time was right to buy Clayton Brown and to use the acquisition to build on its goal to expand regional presence and services.

The acquisition allows Dain Bosworth to combine its strength in public finance with Clayton Brown's strength in institutional sales and trading, Civello said.

He called Chyton Brown's sales and trading staff "the core of the company," adding that some key employees would be offered employment contracts and "enhancements" to their commissions.

The acquisition will give Dain Bosworth a fixed4ncome sales force of 88 people in six cities and 15 traders in three cities, according to Civello. About 10 salespeople have left Clayton Brown since the beginning of the year.

Dain Bosworth is still evaluating the public finance staff at Clayton Brown, Civello said.

According to statistics from Securities Data Co., the two firms had similar rankings as senior manager over the last 21 months. In 1993, Dain Bosworth ranked 31 st with 241 issues totaling $1.3 billion. Clayton Brown ranked 33rrl with 177 deals totaling $1.1 billion last year. So far this year, Dain Bosworth ranks 271h with 122 deals totaling $533 million and Clayton Brown ranks 26th with 70 deals totaling $539 million.

The Minneapolis firm expects to retain Clayton Brown's Chicago and New York offices, but the fate of other offices remains .uncertain, particularly those in Texas and Florida, which fall into the geographic territory of Dallas-based Rauscher Pierce Refsnes Inc. Rauscher is also a subsidiary of Inter-Regional Financial Group. Civello said Clayton Brown will be legally known as Dain Bosworth, but may keep using its previous name in certain markets.

Both Brown and Civello said that layoffs are expected, mainly in the back-office operation of Clayton Brown. Civello said much of that work will be moved to a clearing subsidiary of Inter-Regional Financial Group.

Today, Dain Bosworth executives plan to visit the Chicago headquarters to give the support staff "a more definitive understanding" of their job status, Civello said.

Brown, who started his firm 27 years ago, said he believes the employees will vote in favor of the acquisition.

"I think it's the best thing for the company," he said.

Brown, who is 66, said he plans to retire and will not have any role with Dain Bosworth.

Dain Bosworth was the second firm in two years to express interest in Clayton Brown. In 1992, Milwaukee-based Robert W. Baird & Co. began negotiations to purchase the firm. Negotiations ended that May after Clayton Brown's management decided to keep the firm independent and eventually make it employee-owned.

In October 1991 Clayton Brown sold its unit investment trust division to Nike Securities in Lisle, Ill. The division had made up 30% of Clayton Brown's business.

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