(Adds share reaction, analyst comment)
By Christian Plumb
NEW YORK Jan 9 Stifel Financial Corp. (SF.N) said on Tuesday that it had agreed to acquire Ryan Beck Holdings Inc., a unit of Florida regional bank BankAtlantic Bancorp Inc. (BBX.N) for about $91.1 million in stock.
Stifel Chief Executive Ronald Kruszewski said on a conference call that the acquisition would help expand the company's Stifel Nicolaus brokerage unit expand in the eastern and southeastern regions of the United States.
BankAtlantic, which will become Stifel's top stockholder, had sought last year to spin off Ryan Beck, which it acquired in 1998, through an initial public offering. It postponed the deal in July, citing market conditions and the investment bank's weak financial performance.
Stifel Financial shares were up nearly 8 percent in afternoon New York Stock Exchange trade, while BankAtlantic fell more than 3 percent.
The purchase price is less than $400,000 per broker, said an analyst who requested anonymity.
That's a low valuation compared with Swiss bank UBS's UBSN.VX recent acquisitions of investment bank Piper Jaffray Cos. Inc.'s (PJC.N) retail brokerage unit and KeyCorp's (KEY.N) McDonald Investments branch network, he said.
In those deals, UBS paid between $700,000 and $800,000 per broker, the analyst said.
Another analyst, Sandler O'Neill's Joseph Fenech, said BankAtlantic shareholders were disappointed by the price paid for Ryan Beck, equivalent to its book value, and that the bank is receiving shares instead of cash.
"People are disappointed the capital wasn't freed up for share repurchases," he said.
Executives on a Stifel Nicolaus-Ryan Beck conference call said they expected BankAtlantic to eventually sell the stake.
The acquisition is the latest in a series of takeovers by St. Louis-based Stifel, which in 2005 agreed to buy Legg Mason Inc.'s (LM.N) former capital markets business from Citigroup (C.N).
In November, Stifel agreed to buy privately held First Service Financial Co. and a subsidiary for about $38 million in cash.
Under the Ryan Beck deal, Stifel will issue 2,531,000 of its shares as initial consideration. The number of shares is based on Ryan Beck's net book value of about $91.1 million on Nov. 30 and Stifel's stock price of $36 during negotiations.
Stifel will also issue five-year warrants for the purchase of up to 500,000 shares at $36 each. If Stifel does not received shareholder approval for the warrants before June 30, it said it would replace them with $20 million in cash.
In addition, Stifel will make earn-out payments, capped at $40 million, based on the performance of Ryan Beck's private client division.
A second contingent payment would be 25 percent of Ryan Beck's investment banking fees above $25 million for each of the next two years, Stifel said. The company will also set up a retention program valued at about $42 million.
Stifel said it expected the deal to close in the first quarter.
BankAtlantic shares were down 44 cents, or 3.3 percent, at $13.11 in afternoon New York Stock Exchange, while Stifel was up $2.97, or 7.8 percent, at $41.06. (Additional reporting by Anant Vijay Kala in Bangalore)