RCS Capital Corp RCAP.N on Thursday announced it would buy independent broker-dealer Cetera Financial Group from private equity firm Lightyear Capital LLC for about $1.15 billion in cash to expand its retail brokerage business.
New York-based Lightyear Capital, which is run by former Paine Webber Group Inc Chief Executive Officer Donald Marron, created Cetera in 2010 when it acquired three ING ING.AS broker-dealers.
Over the years, Lightyear has continued to build Cetera through acquisitions. Just last year, it acquired two brokerage firms from MetLife Inc. Today the firm provides broker-dealer and advisory services to about 6,500 independent financial professionals as well as financial institutions.
RCS, which has been an aggressive acquirer over the past few months, approached Lightyear several times last year about buying Cetera, Marron said. But it was not until right before Christmas that Lightyear took the offer seriously, he said.
"They said Cetera's management would remain as it is and they asked if they could make a preemptive bid," Marron told Reuters in an interview. "Price is important to private equity, but also is the firm (so) its value is in Valerie Brown and her team."
Cetera Chief Executive Valerie Brown will continue to operate Cetera.
This is the fourth brokerage acquisition by New York-based RCS Capital, which just went public in June, in the last four months.
It bought Summit Financial Services for $49 million in November and Investor Capital Holdings for about $52.5 million in October. It also bought Hatteras Funds Group in the same month for an undisclosed amount.
The company's investment banking arm and Barclays BATC.L were its financial advisers, while Bank of America Merrill Lynch (BAC.N) advised Cetera.
The transaction is expected to close in the later part of 2014.
RCS Capital's shares were trading at $19.10, up over 3 percent in late afternoon trading, the New York Stock Exchange.
(Reporting by Avik Das in Bangalore; Jessica Toonkel in New York; Editing by Kirti Pandey, Saumyadeb Chakrabarty and Cynthia Osterman)