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Story by The Wall Street Journal

Deal would expand wealth management segment by about 35%

Stifel Financial Corp. said it plans to acquire Sterne Agee for $150 million in cash and stock, bolstering its wealth management segment.

The acquisition would add about 730 financial advisers and independent representatives who manage more than $20 billion in client assets, boosting the size of the St. Louis brokerage’s global wealth management team by 35%.

Stifel CEO Ronald J. Kruszewski also said the deal would also complement its fixed-income platform and have minimal overlap, while offering a platform to grow its independent adviser business.
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The acquired businesses are expected to generate about $300 million to $325 million in revenue a year.

The news of the acquisition also came as Stifel reported weaker-than-expected results for its fourth quarter.

Stifel has been expanding through a recent string of acquisitions, last year closing deals for 1919 Investment Counsel & Trust Co., formerly known as Legg Mason Investment Counsel & Trust Co., another bid to expand in wealth management. And in November, Stifel agreed to acquire Montgomery, Alabama-based Merchant Capital LLC, strengthening its position in several underwriting markets in the Southeast.

It also bought New York investment bank KBW Inc. for $575 million about two years ago.
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Depending on shareholder elections, the cash consideration of the Sterne Agee deal would range from about $66 million to $77 million, and the stock component will be 1.42 million to 1.62 million shares.

It is expected to close in late spring and is subject to approval by Sterne Agee shareholders.

Meanwhile, Stifel and Sterne Agee have agreed to sell the FBC Mortgage business back to its founders and committed to operating Sterne Agee’s institutional equity and investment banking business on a stand-alone, independent basis. The companies said they have been approached by a number of “suitable” partners and is also considering other strategic options, including spinning off the business as a separate entity.

In all, Stifel posted a fourth-quarter profit of $45.2 million, or 58 cents a share, down from $48.3 million, or 64 cents a share, a year earlier. Excluding acquisition-related expenses and other items, earnings fell to 75 cents from 79 cents. Revenue increased 2.8% to $578.1 million.

Analysts polled by Thomson Reuters expected per-share profit of 78 cents and revenue of $582 million.

Stifel Financial was started in 1890 as one office in St. Louis, following the motto of Herman Stifel of “safeguarding the money of others as if it were your own.” Mr. Stifel joined in 1897 as treasurer but is identified in firm literature as a founder.

Stifel shares were unchanged after hours and are up more than 8% over the past 12 months.