* 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 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
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
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.