Stifel Financial agreed on Monday to buy KBW Inc. for about $575 million in cash and stock, giving the acquisitive investment banking firm a prominent adviser to the financial services industry.
Under the terms of the deal, Stifel will pay $10 a share in cash and $7.50 a share in stock. (The exact amount of stock that KBW shareholders will receive will be based on Stifel's volume-weighted average closing price for the 10 days before closing.)
Shares in KBW leaped 17.5 percent in premarket trading on Monday, to $19.15, while those in Stifel rose 1.9 percent, to $32.50.
Over the past few years, Stifel has proved hungry for deals, having bought Thomas Weisel Partners and struck a partnership with the restructuring specialists Miller Buckfire (which the firm has indicated that it would like to buy outright.)
In KBW - short for Keefe Bruyette & Woods - Stifel is acquiring a 50-year-old firm well-known for its catering to the financial services industry. KBW specializes in advising on deals involving banks, insurance companies and trading concerns, and it has a well-regarded research arm.
The deal appears in part to be a bet that financial services deals have nowhere to go but up, with mergers involving banks and insurance companies having been largely depressed since the financial crisis.
“This merger with KBW, a premier, specialized financial services firm, provides Stifel with an exciting opportunity to grow and become a market leader in the financial services sector, Ronald J. Kruszewski, Stifel's chairman and chief executive, said in a statement. “Our shared culture and platforms are highly complementary, and this combination expands our capabilities at a time when we believe the financial services sector is poised to benefit from improving fundamentals.â€
The target company's shares have outperformed its soon-to-be parent's over the last year, having risen 17.5 percent compared to less than 1 pe rcent for Stifel.
KBW's chief executive, Thomas B. Michaud, is expected to join Stifel's board, and will continue to lead KBW as a separate business division within its new parent.
Based in New York, KBW has grown from an eight-person shop over five decades into a 537-employee firm with offices in the United States, Europe and Asia. It survived a devastating blow during the Sept. 11 terrorist attacks, which destroyed its headquarters in the World Trade Center and killed 67 employees and five of nine directors, including then-chairman and co-chief executive, Joseph Berry.
Stifel said that it expected the combined company to yield annual net revenues of $1.8 billion, based on results from the year to date through Sept. 30.
The deal is subject to approval by KBW's shareholders and regulators.
Stifel was advised by its own investment banking team and the law firm Bryan Cave, while its board received a fairness opinion from Stephens Inc. KBW was advi sed by itself, Bank of America Merrill Lynch and the law firm Sullivan & Cromwell.
