Ladenburg Thalmann Financial Services has agreed to acquire Securities America from Ameriprise Financial Inc. in a transaction valued at a minimum of $150 million. The deal may include additional payments to Ameriprise provided that Securities America meets certain performance targets.
The transaction will give Ladenburg Thalmann approximately $450 million in additional annual revenues, assuming they can retain about 1,700 advisors affiliated with Securities America. Upon completion of the transaction, Jim Nagengast will remain president and CEO of Securities America.
In a prepared statement, Ladenburg Thalmann said that with Securities America's $50 billion in client assets, the combined firm will now have $70 billion in total assets, implying that Securities America is larger than the existing business units of Ladenburg Thalmann. Based on the trailing 12-month revenue, the combined operations would have about $675 million in total revenues and 2,700 reps.
Whether Ladenburg Thalmann can retain the vast majority of Securities America's advisor network is an open question. Ameriprise put the broker-dealer up for sale earlier this year after agreeing to settle claims against Securities America for more than $150 million as a result of the sale of about $400 million in private placement securities from Medical Capital Holdings, which turned out to be fraudulent, unbeknown to Securities America.
Since then, rival firms have been aggressively recruiting Securities America reps who have been concerned about the fate of the firm. LPL Financial and Commonwealth Financial Network have been among the biggest beneficiaries. One independent recruiter surmised that Ladenburg might offer Securities America's top producers retention bonuses if they agreed to stay for several years.
The transaction is being financed by an affiliate of Dr. Phillip Frost, Ladenburg's principal shareholder and chairman of the board.
"The acquisition of Securities America is a transformative transaction for Ladenburg, enabling us to immediately bolster our position in the vibrant independent broker-dealer space and provide a platform for future growth," stated Frost. "This strategic combination is consistent with Ladenburg's long-stated goal to grow into a more diversified financial services firm with a stable, growing revenue stream from our independent broker-dealer business to balance our capital markets and investment banking areas. We are excited to welcome Securities America and its talented network of financial advisors to Ladenburg."
Richard Lampen, president and CEO of Ladenburg, stated, "With the addition of Securities America and its 'best in breed' independent broker-dealer platform, Ladenburg will significantly increase its market share in the independent advisory space and solidify its position as a leading independent broker-dealer. ... Ladenburg has a track record of success with its past broker-dealer acquisitions, Investacorp and Triad, by keeping those businesses truly independent. Ladenburg looks forward to capitalizing on many attractive opportunities by leveraging Securities America's industry-leading technology, risk management and practice development/management platform."
Nagengast said, "Ladenburg is the ideal partner for Securities America as we seek to expand our business and continue to enhance the ability of our financial advisors to serve their clients. We look forward to continuing to operate as a stand-alone entity within Ladenburg, which will allow us to maintain our highly valued company culture while also providing our advisors with access to additional tools and resources."
The transaction, expected to close by the end of 2011, is subject to customary closing conditions, including regulatory approval. Approval by Ladenburg's shareholders is not required. Jefferies & Company Inc. served as financial advisor for Ladenburg in the transaction, and Greenberg Traurig and Graubard Miller served as legal counsel. Lazard served as financial advisor for Ameriprise Financial Inc. in the transaction and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel.