UPDATE 2-Stifel to buy rival Thomas Weisel for about $300 mln

* Deal offers a 74 pct premium

* Stifel expects $62 mln in savings

* Stifel shares down 4.4 pct, Thomas Weisel up 65 pct (Adds details from conference call)

April 26 (Reuters) - Stifel Financial Corp SF.N, known for its research services, will buy smaller rival Thomas Weisel Partners Group Inc TWPG.O for about $300 million in stock to strengthen its middle-market investment banking business.

Each Thomas Weisel share will be exchanged for 0.1364 shares of Stifel. Based on Stifel’s Friday close of $55.74, the deal values Thomas Weisel at $7.60, a premium of 74 percent over the stock’s last close.

Loss-making Thomas Weisel currently trades at 1.1 times its book value -- or the value based on the company’s assets minus liabilities -- and trails the sector average of 2.89 times, according to Reuters data.

St. Louis-based Stifel, which has made seven small brokerage purchases since 2000, has been looking to add to its investment banking and capital markets businesses, while it also builds out a commercial bank to support clients.

The parent of Stifel Nicolaus & Co is one of several smaller securities firms that thrived in the wake of the Bear Stearns and Lehman Brothers collapses and the takeover of industry giant Merrill Lynch by Bank of America BAC.N.

As of Dec. 31, the company’s shareholders’ equity was $873.4 million.

“One of our strategic goals is to grow investment banking and expand our institutional equity business domestically and internationally. And this deal does this,” Ronald Kruszewski, chief executive of Stifel, said on a call with analysts.

The company expects Thomas Weisel’s platforms to add to its investment banking, particularly in technology, healthcare, mining and energy.

Kruszewski will continue to head Stifel Financial. Thomas Weisel, CEO of Thomas Weisel, will become co-chairman, along with Kruszewski.

San Francisco-based Thomas Weisel will be merged into a unit of Stifel and become its wholly owned subsidiary, the company said in a statement.

The transaction is expected to close on or about June 30, generate savings of about $62 million for Stifel Financial and add to its earnings.

Stifel was advised by its own wholly owned unit Stifel, Nicolaus & Co, Inc, and Thomas Weisel Partners was advised by its wholly owned subsidiary Thomas Weisel Partners LLC.

Shares of Stifel Financial were trading down 4.4 percent at $53.26 on the New York Stock Exchange, while those of Thomas Weisel were trading up 65 percent at $7.19 on Nasdaq. (Reporting by Sweta Singh in Bangalore; Editing by Maju Samuel)