Josephthal, Lyon & Ross has made an offer to merge with Chicago-based Rodman & Renshaw Capital Group Inc., a Josephthal official confirmed yesterday.

In recent weeks, Josephthal, a privately held New York-based investment bank and brokerage firm, has purchased 330,000 shares of Rodman & Renshaw stock, or approximately 7.6% of the outstanding shares of the company, said Dan Purjes, chairman, president, and chief executive officer of Josephthal.

Purjes said he believes the purchases make Josephthal the largest single holder of Rodman & Renshaw stock.

Rodman & Renshaw's chairman, Kurt Karmin, and his family reportedly hold approximately 11% of the firm's stock. Karmin alone holds slightly more than 6% of Rodman's stock, said Gregory P. Quinlivan, general counsel and executive vice president of Rodman.

"Combining the two firms would result in a combined company with $200 million in revenues, very sizable profits, a high return on equity, and over $60 million in capital," Purjes said.

"We would provide the majority of the revenues and most of the profits. They would provide the majority of the capital," Purjes said.

Josephthal, because it is a privately owned firm, does not release specific earnings and revenue information.

Rodman & Renshaw reported revenues for the third quarter of fiscal 1993, which ended March 26, of $22.6 million, up from $22.4 million in the previous year. Net income was $263,000 or six cents per share, down from $605,000 or 14 cents per share last year. For the first nine months of fiscal 1993, earnings declined to $631,000 or 14 cents per share, compared with $1.57 million or 36 cents per share last year.

Rodman & Renshaw Capital Group, through its principal subsidiary, Rodman & Renshaw Inc., is a full service securities and commodities broker-dealer and investment banking firm with more than 500 employees. Its line of businesses includes retail brokerage, investment banking, asset management, and futures and options.

Rodman & Renshaw has been involved in municipal finance since the firm opened in 1951. The firm focuses on general market municipals, in both institutional and retail sales and trading. It has 21 employees who work on municipals exclusively, Quinlivan said.

As of July 27, Rodman & Renshaw ranked 104th among municipal underwriters, working as senior manager of 14 issues totaling $120.9 million, according to Securities Data Co. The firm served as co-manager of 69 issues totaling $1.99 billion.

A merger of Josephthal and Rodman & Renshaw would be beneficial to both companies, Purjes said.

"It's a very complementary fit. [Rodman is] strong in fixed-income sales trading and origination," Purjes said. "Josephthal has a large retail sales force and appetite, but we find we don't have enough product."

In addition, Josephthal, which focuses primarily on equities, has a strong research department, Purjes said.

Prior to receiving the merger offer from Josephthal last Friday, Rodman & Renshaw had been considering a change in senior management.

Karmin, 65, had talked with the board about stepping down, and California investor Marshall Geller had been suggested as his successor, Quinlivan said.

Geller, who also has been recently acquiring Rodman & Renshaw stock, currently owns an approximately 5.2% stake.

Purjes said that Josephthal and Rodman have been discussing the possibility of a merger for several months and have even worked together on financings. However, he said, the Geller proposal "accelerated our deliberations. We were heading in that direction anyway. "

Several members of Rodman & Renshaw's board of directors are now working to select an investment banking firm that will advise Rodman & Renshaw on the merger offer, Quinlivan said. He declined to be specific on how long it would take to analyze the offer.

"We're always looking for opportunities to expand that would be profitable for the company," Quinlivan said.

Purjes declined to comment on details of the possible merger, but he did say no decision had been reached on whether a merger would create a public or private company.

"It can be either way and we're exploring the pros and cons" of each possibility, Purjes said.

Rodman & Renshaw's stock closed Tuesday at 7 1/8, unchanged on trading volume of 83,800 shares.

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