Stifel Financial Seeks To Improve Margins Through Divestiture

Stifel Financial Corporation (NYSE:SF) announced a definitive agreement to sell its Sterne Agee’s legacy independent brokerage, clearing and registered investment advisory businesses to INTL FCStone Inc. (NASDAQ:INTL) , a New York-based financial services firm.

Stifel Financial’s Chairman and CEO Ron Kruszewski said, “The margins were lower than last year due to the independent contractors from Sterne Agee, who operate at lower margins than our traditional wealth management business.”

Stifel Financial had acquired Sterne Agee in Jun 2015 for $150 million. The company plans to retain Sterne Agee’s private client group and institutional fixed-income business.

Deal Details

As part of the agreement, Stifel Financial will divest Sterne Agee Financial Services Inc., Sterne Agee Clearing Inc., Sterne Agee Leach Inc., Sterne Agee Asset Management and Sterne Agee Investment Advisory Services. To support these businesses, INTL FCStone has agreed to hire substantially all of the Birmingham, AL-based support professionals.

The divestiture, subject to regulatory approval, is expected to close next month. Though the terms of the agreement were not disclosed, the consideration is expected to be approximately equal to the net asset value of the entities, following a financial restructuring of the combined businesses.

Impact of the Deal

The deal will add $11 billion in client assets, over 100,000 accounts and 50 correspondent clearing relationships to INTL’s business. The Sterne Agee business will provide a strong platform for the company’s growth in clearing and related securities activities and a strong foothold in the retail wealth management segment.

Stifel Financial is one of the few securities firms that have expanded rapidly through acquisitions since the 2008 financial crisis. For the company, this divestiture is in stark contrast to its series of takeovers last year.

The immediate impact of the deal along with the global concerns related to Brexit led to a drastic fall in the company’s share price subsequent to the announcement.

Currently, Stifel Financial holds a Zacks Rank #2 (Buy).

A couple of financial investment management stocks that warrant a look are Manning & Napier Inc. (NYSE:MN) and Eagle Point Credit Company Inc. (NYSE:ECC) , both holding the same Zacks Rank as Stifel Financial.


STIFEL FINL (SF): Free Stock Analysis Report

EAGLE POINT CRD (ECC): Free Stock Analysis Report

MANNING&NAPIER (MN): Free Stock Analysis Report

Original post