Cetera Selling Majority Stake to Private Equity Firm Genstar
(Adds details on financial terms in second paragraph.)
Cetera Financial Group, the independent brokerage network of almost 8,000 advisors in six firms, said Tuesday that it is selling a majority stake in its parent company to Genstar Capital.
The purchase price for El Segundo, California-based Cetera was around $1.7 billion, according to a Bloomberg report citing people familiar with the matter. The companies did not disclose financial terms.
The announcement ends month of speculation about the fate of Cetera, whose parent Aretec Group (Cetera spelled backwards) announced a “capital structure review” in February. According to several reports, rival broker-dealers LPL Financial Services and Lightyear Capital’s Advisor Group had signed confidential agreements to examine Cetera’s books.
Cetera emerged from Chapter 11 bankruptcy in 2016 out of the ruins of Nicholas Schorsch’s RCS Capital.
“The successful conclusion of our capital structure review process represents the next milestone in our company’s strategic transformation that began in 2016,” Cetera Chief Executive Robert Moore said in a prepared statement.
Cetera will continue to operate through both traditional brokerage offices and its “specialty channel” at small banks and credit unions under its current leadership, the company said. Cetera reorganized into its two-channel structure with 7,700 independent brokers in February.
A spokesman declined to say whether its six affiliated firms will be retained under the new ownership structure. Ranked by customer-asset size, the firms are Cetera Advisor Networks, Cetera Advisors, Cetera Financial Institutions, First Allied Securities, Summit Brokerage Services and Cetera Financial Specialists.
Cetera’s leadership team will maintain “a meaningful” ownership position in the new company. The deal is expected to close in the third quarter, pending regulatory approvals.
Genstar, which last year closed its sixth fund with $3.1 billion of limited partner capital commitments, specializes in middle-market companies in the financial services, industrial technology, healthcare and software industries. It has approximately $10 billion in assets under management, and its portfolio companies include Mercer Advisors, AssetMark, Ascensus, Apex Fund Services, Acrisure, ISS, and Strategic Insight.
The acquisition will continue a trend of private-equity firms investing in wealth-management umbrella firms. KKR and Stone Point Capital last year bought a majority stake in Focus Financial Partners, a consolidator of small registered investment advisers that earlier this month filed for an initial public offering that values the firm as high as $2.5 billion. Thomas H. Lee Partners last year invested $100 million in HighTower Advisors.
Genstar executives Tony Salewski, Sid Ramakrishnan and Ben Brigeman, who was a former Charles Schwab retail brokerage executive, will serve on the reconstituted Aretec board, along with Moore (a former LPL executive) and Hal Strong, the former vice chairman of Russell Investments.
Goldman Sachs advised Cetera on the deal, while UBS Investment Bank and Deutsche Bank Securities Inc. served as financial advisors to Genstar.