Stifel to purchase KBW for $575m

KBW, a boutique investment bank that lost scores of employees in the World Trade Center attack but managed to rebuild in the years since, was acquired by Stifel Financial for $575m in cash and shares.

On September 11 2001, 67 of KBW’s 224 employees were killed when terrorists crashed a jet into its offices in the south tower of the World Trade Center. In the years since, KBW has recovered with the support of other banks on Wall Street.

The company employed about 450 people at the start of last month and has expanded its business into Europe and Asia in recent years.

“It’s always with you and it’s a part of our culture,” Thomas Michaud, KBW chief executive, said of the 9/11 attacks. “Frankly, having a team around our firm that has survived that and gone forward makes today’s financial crisis look like a smaller mountain to climb.”

Stifel, a midsized US investment bank based in St Louis, Missouri, said the acquisition would allow it to add KBW’s specialised business of researching and advising banks and other financial services companies to its portfolio.

Ronald Kruszewski, chief executive of Stifel Financial, said the deal was part of an acceleration of consolidation across the financial industry as lower trading volumes and slower M&A activity have put pressure on profitability. “You could wait until markets are booming and maybe both of our stock prices are moving higher but I don’t have a crystal ball and this opportunity was available.”

He added: “I’ve known KBW’s management for years and from my perspective this opportunity adds to our franchise.”

Under the terms of the cash-and-stock deal, KBW’s shareholders will receive a total of $17.50 a share split between $10 a share in cash and $7.50 a share in Stifel common stock. The price represents a premium of 7 per cent over KBW’s share price at Friday’s close.

The deal is expected to close in the first quarter of 2013, with the equity portion based on Stifel’s share price 10 day’s before completion. Stifel is expected to be in control of $250m in excess capital on KBW’s balance sheet immediately after the deal closes.

Chris Harris, analyst at Wells Fargo Securities, questioned the rationale for the deal given that Stifel already has a significant capital markets business.

Stifel Financial shares rose 1.6 per cent to $32.43 just after midday in New York. The company reported that net revenues grew 25.7 per cent year on year to to $420m in the three months to September, while net income rose 69 per cent to $37m. KBW said net sales fell 8.7 per cent as net losses narrowed to $5.2m in the quarter.