Stifel Seeks to Subvert Baird’s Purchase of Hilliard
Stifel Financial Corp. attempted to undermine Robert W. Baird’s planned acquisition of J.J.B. Hilliard, W.L. Lyons days after the deal was announced on November 27, according to sources.
Stifel Chairman and Chief Executive Ron Kruszewski sent a letter to Hilliard Chairman and CEO James Allen within a week, offering what he believed was a slightly improved acquisition price and blandishing Stifel as a more attractive home for the Louisville, Kentucky-based firm’s approximately 380 brokers, the sources said.
Key to his pitch was a more generous war-chest to fund retention offers, the sources said. Stifel is willing to double the retention pool that Baird will set aside, the sources said.
Kruszewski’s pitch was aimed at persuading Allen, who has spent his 37-year brokerage career at Hilliard, that his legacy would be stronger under the umbrella of the Stifel Nicolaus retail brokerage channel, the sources said.
Allen, who would be a vice chairman at Baird, did not respond to Kruszewski’s letter, they said.
Kruszewski, who has acquired some 25 retail brokerage, investment banking and trading firms since 2005, does not appear to have taken a formal approach to lassoing Hilliard. He has not approached its parent company, Houchens Industries, nor has Stifel filed any notification of a “bear hug” or other offering in a regulatory filing. Unlike Houchens and Baird, Stifel is publicly traded.
Kruszewski’s approach is unconventional at best if he were really trying to combat the offer from Wisconsin-based Baird, said Marcel Kahan, a mergers lawyer who teaches corporate law at New York University.
“From the perspective of Houchens, why would they care about the retention offers,” he said. “Maybe what is going on is that they want to pressure Houchens through the employees of Hilliard.”
Allen and Kruszewski, who has been CEO of Stifel since 1997, are longtime acquaintances. Allen is chairman of the Securities Industry Financial Markets Association, and Kruszewski sits on the trade group’s board and has previously been its chairman.
Allen did not return calls for comment left at his home and at his office. Spokespeople at Baird, Hilliard and Houchens—a conglomerate whose primary holdings are grocery and convenience store chains—did not return calls for comment.
Kruszewski has brandished his recruiting warchest in the past as a tool to pick off individual brokers, and Stifel last week recruited a father-son team from Hilliard in Memphis.
After losing a bidding war for Morgan Keegan to Raymond James Financial in 2012, Stifel flaunted retention bonuses that it said would have bettered its competitor’s deals, according to a press report. Raymond James has said that it retained 95% of Morgan Keegan brokers to whom it offered deals.
Baird’s retention deals of 25%-to-75% of trailing 12-month revenue are restricted to brokers who generate at least $400,000 in revenue, sources said.
As part of its standard recruiting package, Stifel offers brokers who generate $400,000 of annual fees and commissions up to 120% of their trailing-12 production, a total that includes front-end bonuses as well as awards for hitting production and account transfer targets in future years.