Stifel is selling off Sterne Agee's independent broker-dealer just over a year after the firm bought the unit as part of a $150 million acquisition.
More than 600 independent advisers who had joined Stifel from Sterne Agee are expected to make the move to INTL FCStone, a New York-based financial services firm that agreed to the purchase, according to a spokesman. Sterne Agee has about $11 billion in assets, Stifel says. Also included in the sale are Sterne Agee's clearing business and RIA businesses.
Stifel did not disclose terms of its deal with INTL FCStone.
The sale stood in contrast to Stifel's actions last year. The firm made three acquisitions, including Barclays' U.S. wealth management unit, helping boost Stifel's overall adviser headcount by more than 30% to over 2,800 advisers.
But it wasn't always smooth sailing; Stifel kept about half of the Barclays advisers. The rest passed on the opportunity to join the firm, opting to move to rivals like Merrill Lynch and J.P. Morgan Securities.
And compared to the Barclays advisers, the Sterne Agee reps were much lower producers.
"My guess is that Stifel doesn't want a lot of those smaller producers," says recruiter Rob Blevins.
FALLING SHARE PRICE
Ronald J. Kruszewski, CEO of Stifel, said in a statement that he was pleased to have found an acquirer for the Sterne Agee businesses.
A company spokesman did not respond to requests for further comment on the reasons for the sale. But he said the firm will continue to maintain Century Securities, the independent broker-dealer that Stifel operated prior to the Sterne Agee acquisition.
Stifel's stock was trading at about $30 at the close of markets on Monday, down from a high of nearly $60 in June 2015.
"No one understands the frustrations with our stock as we deal with market valuations than I do," Kruszewski told analysts on a recent earnings call.
The St. Louis-based company's net income has fallen in recent quarters. Stifel's profits dropped to $27 million for the first quarter from $43 million for the year-ago period. Revenues were up, rising to $619 million from $560 million. But rising costs outpaced that growth. Expenses climbed to $576 million from $490 million, driven by mushrooming compensation bills.
The St. Louis-based company's cash and cash equivalents are also down, dropping to $577 million for the first quarter from $811 million for the period ending Dec. 31, according to Stifel's earnings report.
"The outlook remains challenging… and we heard little to suggest cost can be managed down in the near term to offset weaker revenues," Credit Suisse analyst Christian Bolu wrote in a May 9 research note.
Bolu said that he continued "to believe the headwinds for [Stifel] are under-appreciated," and he rated the company's stock as "underperform."
INTL FCStone says the company will retain the 160 managers and staff of the Sterne Agee businesses it is acquiring.
Sean O'Connor, CEO of INTL FCStone, said that the deal fulfills his company's ambition to clear securities for its customers. "We believe that the securities industry has rapidly consolidated, providing an opportunity for a well-capitalized, credible mid-market clearer."
Charles Lyon, head of the company's Securities Division, says that the wealth management unit "should lead to additional opportunities in that space."
INTL FCStone reported $55.7 million in pretax profits for 2015, up from $19.3 million for the prior year.