DALLAS - Kansas City, Mo.-based Stern Brothers & Co. has signed a letter of intent to merge with a new firm owned by black women in a deal that would make Stern a minority-owned brokerage for the first time in its 75-year history.

James Allen, co-chairman of Stern Brothers, said Friday the final terms of the merger with Lewis, Sims & Letterman of Kansas City, Mo., could be competed within 30 days.

"That would be my hope," said Mr. Allen, a former bond lawyer in Texas and Missouri who was involved in a 1989 buyout of Stern. "We've tentatively agreed to merge, but the details haven't been worked out."

The deal would expand the firm's capital from $2 million to $5 million, expanding its bond underwriting capabilities. Before a series of ownership changes in the mid-1980s, the firm had capital reserves of as much as $70 million.

Mr. Allen said Lewis Sims would form a wholly owned holding company to acquire Stern, which is currently 90% owned by St. Louis-based Bingham & Co. Capital Markets. He said the plan would likely expand the employee ownership of the firm.

At least initially, the Stern Brothers name is expected to be continued.

Merger talks began in June with Lewis Sims, which opened for business four months ago with offices in Kansas City and Denver. While some competitors said the deal was an attempt by the minority-owned firm to buy credibility in the municipal industry, executives deny that.

"It's a wonderful opportunity for us to be involved with a company that is 75 years old," said Jumetta Posey, chairwoman of Lewis Sims. "I didn't see it so much as buying credibility as it was buying a business that has longevity."

Later, she added, "There aren't any minority-owned firms with 75 years of history."

Ms. Posey started the firm after leaving Denver-based Weldon Sullivan Carmichael & Co., a municipal securities firm she helped found in 1988.

She said she left Weldon Sullivan because her goals differed from her partners'. "I really wanted to build a national firm," Ms. Posey said.

She said the newly merged firm would maintain offices in Denver, Kansas City, and St. Louis, while keeping expansion options open. None of the 30 employees at Stern Brothers or six at Lewis Sims will be displaced because of the merger.

Stern Brothers now has four employees in corporate finance, nine in public finance, and a dozen salesmen or traders. "We think there will be a net increase over time," Mr. Allen said.

In recent years, the firm has not been a major player nationally or even within the Missouri-Kansas market it serves. So far this year, the firm ranks number 144 nationally as senior manager, with 11 deals totaling $38.5 million, and number 174 as a co-manager, with 21 issues totaling $306.1 million, according to Securities Data Co.

As a new firm Lewis Sims, has not appeared in the rankings. Earlier this summer, the firm was the subject of a minor controversy in Kansas City, Mo., after city officials awarded a $35,00 financial advisory contract to the firm.

One of the principals of Lewis Sims is the wife of Archie Welch Jr., a top adviser to Kansas City Mayor Emanuel Cleaver. The principal, Aretha Welch, owns 25% to 50% of the firm.

Ms. Posey is listed as owner of 10% to 25% of Lewis Sims, while 40% of the firm is controlled by LSL Holdings Inc., a Missouri corporation. Records how that leading investors in the holding company include Kansas City financier Lee Greif, who owns Midland Bank of Kansas City, as well as other executives of the bank.

The proposed merger bucks a trend of larger firms buying smaller ones, often in new markets.

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