Reuters logo
UPDATE 2-Wealth manager Edelman to private for $260 mln
April 16, 2012 / 1:40 PM / 5 years ago

UPDATE 2-Wealth manager Edelman to private for $260 mln

* Offer from Lee Equity Partners LLC for $8.85 per share

* Edelman shares rise more than 41 pct

* Edelman can shop for other offers for 60 days

April 16 (Reuters) - Wealth management company Edelman Financial Group Inc said investment firm Lee Equity Partners LLC had offered to take the company private in a buyout valued at about $260 million.

The $8.85 per share offer, a 43 percent premium to Edelman’s Friday closing price, must be approved by two-thirds of the firm’s shares and a majority of non-management shareholders. The agreement lets Edelman seek other offers for up to 60 days.

“For quite a while, we have felt that the company could be better managed as a private entity, given the difficulty of reconciling growth and the strain that growth causes on quarter to quarter earnings,” George Ball, co-Chief Executive of Edelman Financial, told Reuters in a brief phone interview.

Edelman’s shares rose more than 41 percent to $8.74 in Monday trading on the Nasdaq.

Ball, an industry veteran and former E.F. Hutton president and Prudential Bache chairman, also said the company was frustrated that its shares traded in line with financial services indexes. He noted the stock was thinly traded, making it hard for investors to buy or sell without affecting price.

Sandler O‘Neill brokerage analyst Devin Ryan estimates Lee is paying more than 19 times Edelman Financial’s 2012 earnings, a “reasonable” multiple given the firm’s projected growth. Ryan rates the shares as “hold.”

“These deals have typically occurred when markets -- and earnings -- are more frothy than they currently are,” Ryan said. Because Edelman has been expanding, “prior and even one year out earnings do not reflect the firm’s full potential.”

Edelman, which manages roughly $16.3 billion in client assets, was known as Sander Morris Harris Group until March last year when it took the name of its better known, faster-growing investment advisory unit, Edelman Financial Services.

Ric Edelman, founder of that business, was at that time named co-CEO alongside Ball as part of a management succession plan. Ball expects to step aside as CEO after the Lee transaction is completed.

Edelman, the individual, is well known as an author of best-selling personal finance guides and the host of TV and radio shows for small investors in more than 50 U.S. markets

Edelman and Ball, will continue in their roles after the deal is completed and the current expansion strategy will remain in place.

Members of management, who together own 26 percent of the outstanding stock, agreed to vote in favor of the transaction.

The merger agreement was negotiated by a special committee of independent Edelman directors and then approved unanimously by the Edelman board. The proposed transaction is expected to close in the third quarter of 2012, pending shareholder and regulatory approvals.

The deal is the latest in a series of takeovers by private equity firms in the investment advisory business. Last August Warburg Pincus agreed to acquire Mutual Fund Store LLC, which managed $6.6 billion in assets, while Carlyle Group acquired the $4 billion Houston-based Avalon Advisors

In a related transaction, Ric Edelman will sell his 24 percent stake in his Virginia-based Edelman Financial Center unit to Lee Equity’s Thomas Lee. Sanders Morris acquired 76 percent of the business from Ric Edelman about seven years ago.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below