Advisor Group Primes Ladenburg Brokers with Post-Merger Partnership Offer
Advisors at Ladenburg Thalmann Financial Services’ five independent broker-dealers whose production numbers indicate they would qualify as “accredited investors” are receiving emails saying they will be able to buy limited partnership interests in a new parent company once Advisor Group acquires Ladenburg.
“Based on your GDC, we believe you qualify as an accredited investor and, as a valued advisor affiliated with the Ladenburg Thalmann companies, in connection with the close of Advisor Group’s purchase of Ladenburg Thalmann, you may be offered the opportunity to invest,” according to emails that Artemis began sending to advisors on Monday. GDC, or gross dealer concession, is the revenue from sales of annuities and other investment products that independent brokers generate for their parent firms.
The notices, which Ladenburg disclosed in a proxy statement with the Securities and Exchange Commission on January 7, ask advisors to respond by January 14 with preliminary indications of interest about becoming limited partners, with a minimum initial investment of $75,000.
Similar emails are being sent to an unspecified number of Ladenburg employees, based on their income rather than GDC, with a minimum investment of $25,000.
The filing did not say how many advisors and employees are receiving the emails, which ask them to respond with their “non-binding indications of interest” pending a formal offering memorandum. It also did not disclose if they are receiving any insider incentives to participate.
Recipients will be able to fund their partnership purchases with cash or proceeds from selling common shares of Ladenburg in connection with the acquisition closing. “Please also provide us with information on the number of shares that you own so we can provide you with additional information about funding logistics,” the forms say.
Spokesmen at Ladenburg and at Reverence, which is owned by former Goldman Sachs financial institution group investment banker Milt Berlinsky, declined to comment beyond what was disclosed in the proxy statement. Spokespeople at Advisor Group did not respond to requests for comment as to whether advisors at its four broker-dealers are receiving similar partnership opportunities.
Publicly traded Ladenburg has about 148.7 million shares of common stock outstanding. Since word of Advisor Group’s planned acquisition leaked on November 1, shares of Ladenburg have jumped 53%. They were changing hands at $3.46 Wednesday afternoon, up from $2.26 at the close on Oct. 31.
At least five investors have filed individual or purported class-action lawsuits seeking to prevent the merger. Four assert that Ladenburg’s merger offer proxy statement omits material information on projected earnings and on how bankers determined the fairness of Advisor Group’s offer price of $3.50 a share.
A fifth suit seeking to rescind the deal was filed by Phillip Frost, Ladenburg’s former chairman and largest shareholder, the firm disclosed on December 26. Frost sold the majority of his holdings back to Ladenburg in December 2018 for $2.50 per share in cash and 7.25% in ten-year senior notes.
Ladenburg believes the lawsuits are meritless and will “defend vigorously” against the various allegations, according to firm spokespeople. (One of the suits was voluntarily dismissed by investor Harold Bonnikson on Wednesday in the federal court in the southern district of New York, according to a filing.)
Ladenburg’s brokerage firms are Securities America, Triad Advisors, Investacorp, KMS Financial Services and Securities Service Network.
—Vicky Ge Huang contributed to this story.