From The Wall Street Journal

Investment banking firm Piper Jaffray Cos. said Tuesday that it has agreed to acquire energy-focused investment bank Simmons & Co. International for about $139 million in cash and stock, a move to expand its presence to the beaten-down oil-and-gas sector.

Piper Jaffray will pay $91 million in cash and $48 million in restricted stock, in addition to $21 million in cash and stock for retention purposes.

Based in Houston, Simmons offers merger-and-acquisition advisory services as well as trade execution and investment research. It was founded in 1974 by Matthew Simmons to advise oil-field services companies. Mr. Simmons, who died in 2010, was a famous proponent of “peak oil,” the theory that the world is running out of oil.

Over the years Simmons branched out to offer stock research and advise a broader range of energy companies. Its analysts’ daily research note is widely read on Wall Street and in the oil patch.

In an interview, Piper Jaffray Chief Executive Andrew Duff and Simmons executives Fred Charlton and Michael Frazier said the firms began talking about a combination in 2011 as employee-owned Simmons sought to chart a course after its founder’s death. Piper, meanwhile, has long eyed the energy business, they said.

Though the collapse in commodity prices has dented Simmons revenue somewhat, executives said the firm’s business advising pipeline and refining companies remains strong. Meanwhile, they said, new mandates have come from oil-and-gas producers looking to sell assets to raise cash to replace lost bank financing and oil-field services clients that are exploring cost-saving combinations.

“I don’t think there’s really a connection between what the price of oil is and how we get paid,” Mr. Frazier said. “We’ll always be subject to fund flows of hedge funds and mutual funds and money managers…but we’re always going to have our market share.”

Simmons reported revenue of $96 million in its most recent business year, which ended in June. Piper executives said Simmons’s annual revenue has exceeded $120 million in good years, and they expect it to be around $85 million in the current fiscal year.

Piper Jaffray reported $684.1 million in total revenue in 2014, with $369.8 million coming from investment banking.

The firm expects to complete the Simmons transaction in the first quarter of 2016 and anticipates that the deal will add to its earnings during the first full year after the deal closes. Piper Jaffray said it intends to offset dilution from shares issued in the transaction with future share repurchases.

The Simmons executives said that each of its 25 managing directors, who own a bulk of the closely held firm’s stock, have signed on to join Piper Jaffray. The firm’s entire research department is also on board with the move and will continue to publish research under the Simmons brand, they said.

Piper shares slipped 3.7% on Tuesday to close at $34.53 and are down 40.6% this year.

Legal Notice