Filed by Stifel Financial Corp.
Pursuant to Rule 425 under the Securities
Act of 1933,
as amended, and deemed filed pursuant to Rule 14a-12
of the
Securities Exchange Act of 1934, as amended
Subject Company: Thomas Weisel Partners
Group, Inc.
Commission File No.: 000-51370
At the Macquarie Capital 2010 Global Securities Industry Conference on May
18, 2010, Ronald J. Kruszewski, Chairman, President and Chief Executive Officer
of Stifel Financial Corp., made the following remarks related to the pending
merger with Thomas Weisel Partners Group, Inc. and responded to questions from
analysts.
A transcript of portions of the presentation follows:
Alan Zimmerman:
Good
morning, everyone, and thank you for coming. I am Alan Zimmerman and
I'm head of the bank research group at Macquarie Securities. And we are
pleased to have with us today Ron Kruszewski Chairman, President and CEO
of Stifel Financial Corp. We have Tom Weisel over here who's the
Chairman and CEO of Thomas Weisel Partners, who you all know are in the
process of merging with Stifel. And we also have Sarah Anderson, who's
the Director of Investor Relations for the Company. So with that, I'm
please to turn it over to Ron.
Mr. Kruszewski
Thank
you. I will handle the presentation. Tom, who is Co-Chairman Elect,
the lawyers won't let us stand on the podium together yet until we close
the deal. So, I will do the presentation for Stifel. I've got a number
of slides that you have. I'm going to try to get through these quickly
and then we'll take any questions that you might have.
Our
forward-looking statement is standard. I will mention for a second that
you can find information -- we will be filing -- we have filed an S-4
and a proxy statement. So, this is -- we're in a proxy and we need to
be aware that any comments we make can be a solicitation.
...
Our
growth strategy. I think it's apropos today to talk about what we
really want to do, which is to continue to build -- and I will underline
client-facing agency-only businesses and financial services. A lot of
what you're hearing going on today deals with the fact that many of the
investment banks, client businesses are principal. They're the other
side of the trade. And that's causing a lot of controversy, some of
which does worry me, the solutions to that. But Stifel, together with
Thomas Weisel, will continue to build our agency client-facing
business. We think that that's sort of a back to the future model, back
to the '90s as to how business should be done. I think it's how it
should be done. And that is something I'm going to emphasize.
...
What's
in red here was some things that we talked -- this was our growth
strategy back when we did an equity offering two years ago, we laid
these out. We wanted to expand our institutional cash equity business
domestically and internationally. We wanted to grow our investment
banking footprint. We wanted to focus on asset generation within our
bank. And we wanted to approach acquisition opportunities with
discipline. So, what I want to talk about today and answer questions
are the three, and I could've actually highlighted the first one, which
is building our client-facing businesses. But, expand our institutional
business, grow our investment banking, and then at deals with discipline
underscores our merger with Thomas Weisel Partners.
...
When
we looked -- Tom and I first got together on this early last fall in
September, and we talked about that and we went over our respective
firms, Stifel about the time before the merger, 4,600 associates, 294
offices. Stifel's one of the oldest -- I think today the oldest firm
based west of the Mississippi and has a pretty diverse revenue mix
between private wealth management or Global Wealth Management and our
institutional business.
Thomas
Weisel, experts in growth. I think that does underscore what they do,
growth-focused investment bank, 450 associates, primarily an
equity-driven business both on the cash equities, and certainly on
investment banking and M&A. So, those two firms, when we looked at it
in our first dinner, we spent a lot of time talking about our respective
firms. I'll come back to why I think it makes a lot of sense.
A
summary of the transaction. We're going to acquire 100 percent of Tom's
stock in a tax-free exchange. We did a straight fixed exchange ratio
with no caps or collars. We view this as a merger of capabilities, so
we're not going to get into any financial things with caps or collars.
As I said, Tom is going to join me as Co-Chairman. I'm very excited
about that as to what we together can do for this business.
I
think, importantly, before announced the deal the senior leadership of
both firms spent well over a month, almost two months, planning the
integration. Our viewpoint was, was that as much as this deal made
sense on paper, if we couldn't get the senior people to see our vision,
then it didn't make any sense. And they spent a lot of time. And
that's one of the things that is very encouraging to me is how well they
worked together pre and then post the announcement.
On the
Board, Tom, and I believe now three additional directors, will join our
Board. We have viewed on the synergy side, we think the cost
efficiencies are 60 -- over $60 million. And that is -- that sounds
like a lot, but just approximate 5 percent of our combined expenses.
But importantly, there's minimal client-facing changes. Most of these
synergies deal with sort of the back office infrastructure operations.
We've
not assumed any revenue enhancements, although I would like to believe
that those do exist. This -- we still believe this deal can close in
the second quarter, the end of the second quarter, so late June. It
does require regulatory approval and the Weisel shareholders will have a
vote.
Let me
go through--. Just on the financial side, it's sort of a Tale of Two
Cities in terms of whose viewpoint are you looking at it. In one case
when the deal was announced it was viewed as a transaction that was
expensive from my shareholders' perspective because of the premium in
the market. On the other hand, it's very reasonable on a price to
stated -- or restated book value. The bottom line is, it's a fair
transaction. But from my perspective, this transaction is accretive to
both earnings per share and book value per share. And that is the most
important -- the thing to talk about, is that we can add all of these
capabilities and have an accretive transaction to book and to earnings
per share.
Why
this combination makes sense. Simply -- and there's a couple slides
that will do this, but it is an additive, not duplicative transaction.
Highly complementary businesses. It fast tracks our plans to get to
expand our investment banking. It would take years, simply years -- in
fact, we would miss the next cycle in the verticals we want to be in if
we tried to build this person by person. So, it's a very efficient way
to increase our investment banking, the verticals we want to be in.
It
complements our existing platform. I think it's also, from a timing
perspective, it's -- as you can -- as we already know, the capital
market, certainly in the technology, media and telecommunications, or
TMT, it already is showing signs of rebounding. I know it'll rebound.
I'm not exactly sure when. But I know that it really is not going to
get much worse than it's been.
Weisel
also has an asset management business that complements what we're
doing. We think that the senior management teams fit very well
together. So, it's -- this deal on paper makes as much sense of any
deal we've done, and we've done some pretty good deal.
2
In the
end, we believe that building the premier full-service middle market,
growth-focused investment bank. We'll have a $2 billion combined market
capitalization. If you look at the analysts' estimates, our revenues
are anywhere combined from $1.5 billion to $1.6 billion. Over $1
billion of equity capital, so we have an unlevered business model.
You'd expect that. I said we're an agency-focused business model, so
we're not using our balance sheet to either facilitate or, frankly, to
take the other side of client trades. We're using our balance sheet
mostly just to facilitate our agency model.
This
gives us a coast-to-coast presence. And I've talked about it
importantly. Also, and many people don't realize, we will be the number
one provider of US equity research. Over 1,100 companies combined under
research. So, the firm is really growing and growing fast.
This
is a slide that I talk about in terms of why this makes -- it makes so
much sense, and that is on the capital markets side. You can look at
synergies, but you can look at overlap simply by looking at the number
of deals you've done on the origination side. And on a combined basis,
over five years, Stifel and Weisel did 623 transactions. Stifel had
done 321 and Weisel had done 306 transactions. So normally, you would
look at that and say, well, geez, we're about the same size.
But
when you put those together, and if you put Stifel together with almost
any other investment bank, of those 623 transactions you would find a
significant amount of overlap. And that's very difficult because if you
have an overlap on the cover, that means you have overlap in research,
that means you have overlap in investment banking. It's very difficult
to get synergies out of overlap in covers on the origination side.
But if
you look at this, and I think this slide pretty much tells it all from
the synergy aspect and why this deal makes sense, in our core
competencies, as I've defined them in Stifel, which is FIG, real estate,
US energy, aerospace and defense, industrials, transportation,
education, that was Stifel's -- of Stifel's 321 deals, 280 of them were
in those verticals where we actually do a fair amount of business.
In
Weisel's case, they did 32 transactions in those same verticals. But
importantly, we met on the cover one time. And Tom's core competencies
of technology, media and telecommunications, the Canadian energy,
healthcare and consumer, of Weisel's 306 deals they did 274 in those
verticals. We had done 41. But again, we met on three covers.
So,
over five years, out of 623 transactions, we -- our names appeared on a
cover four times. That's sort of the end of the story of the
synergies. And if you look at M&A, it's the same thing. In fact, I
have yet to find a transaction where we either competed for the
business, frankly, or we are on the other side of the business. These
two firms, which are very competitive firms, really played in different
sandboxes. So, the ability to put these firms together was very
compelling, if we could just get it to work.
On the
research side on a combined basis, the same thing. When you understand
the original platform when you put research together, it made sense to
me that nearly 1,300 companies, you'd only have 8 percent overlap. And
that's just by (inaudible).
So
again, this is a very compelling transaction. We will be, as I said, on
a combined basis we'd have over 90 research analysts. The number one
provider of US research, both in total and in small cap. So, number two
is JPMorgan. I guess there's one thing that we're larger than Jamie
(ph) in and that's research coverage. But it is -- it's something that
we believe that our agency-focused business, we lead with research. And
so, this platform is well positioned to serve our needs.
We are
able to enhance what we think is a top tier sales and trading. Again,
because of the fact that we trade different names we're able to utilize
-- allows the personnel from a trading perspective. Just the number of
companies that we will trade will go up and we'll need the people,
primarily on the West Coast and New York, to handle our combined sales
and trading.
Our
Global Wealth Management, there's private equity assets at Thomas
Weisel. They have global growth partners, almost $1 billion
fund-of-funds, healthcare venture partners, venture partners, yada,
yada. There a lot of business there that, together, will form the basis
of our asset management group.
3
And
finally, we have been very good integrators of businesses. If you look
at our transactions, I think the number one thread, common thread of all
these deals was retention. The people at Legg Mason, Ryan Beck, UBS and
the bank, all the key people are still with us because we've done a good
job of putting these people together. We do it because we share common
cultures of meritocracy and entrepreneurialship. And if you embrace
those and truly walk the talk, you can keep good people. And I think
that will play out with the Thomas Weisel merger.
Quickly looking at Stifel. Today -- now I'm going to talk on a combined
basis because I'm already thinking about the way the firm looks. Last
year on a combined basis, about $1.3 billion, our first quarter net
revenues for the first annualized at about -- that's taking Weisel's
first quarter and ours and just combining them together, about $1.460
billion. We'll have a Global Wealth Management, 1,900 financial
advisors -- well, actually more today -- in nearly 300 offices today.
We manage $100 billion for our client assets. We do have a $1 billion
bank. I'll talk about that in a minute.
And
then our Institutional Group, which will have almost 270 investment
bankers and 61 in public finance. We really are, from a strategic -- or
not from a strategic -- in the reshuffling of the deck of Wall Street,
there's a number of firms that are buying to step up into the void that
was created by the departure of Lehman and Bear and some of the rollups
that have occurred. And we think we're one of the firms that can do
that. We're not talking about being a bulge bracket firm, but being a
sub-bulge firm we believe we can fill that. And again, this merger
certainly takes us in that direction.
Our
Global Wealth Management, just to talk about that today. As we look at
it on traditional investment, we're the seventh largest firm out there,
and our growth has been phenomenal. As I said, less than five years ago
we had less than 500 financial advisors. The same thing that's going on
in the market, financial advisors are looking for a platform where they
can serve their clients' interests on an agency basis. So, the same
thing that's true on the institutional side is true on the private
client side, and that's why we're growing as fast as we are, is we're
the place many of these financial advisors want to work.
This,
it just underscores the growth that has gone on, the phenomenal growth
in accounts, branches, you name it. And I think passes prologue as it
relates to Global Wealth Management.
The
bank, we have a $1.1 billion bank. The -- I think the most compelling
thing here is our nonperforming loans are about $1 million in $1.1
billion bank. So, think of the bank as a utility. It's something that
you're not going to see a bunch of bricks and mortar. We're not looking
to have a retail banking franchise. We look at the bank as a utility to
provide liability products to our individual and corporate clients. And
it will be a significant driver of growth because many banks that start
up lack two things -- funding and asset generation capabilities. Our
bank lacks for neither. We have both funding and the ability to
generate high-quality assets. So, the bank is going to continue to do
very well.
The
institutional side. This just will give some sense as we look -- I
think one of the things I'll point to here is in the equity capital
market side. I compared Weisel and Stifel and just combined it. And I
think the thing I would show here is that, back in the time with Weisel
when their markets were better, to 2007, you can see how this business
-- but I think this probably doesn't include Westwind.
...
It
doesn't include Westwind. So, I think if you added the Westwind in
2007, it's almost $400 million in Weisel's equity business. So again,
both our -- on a combined basis, I think this business can be an $800
million business, combined. So, it's an institutional fixed income and
equity, and it's a nice business that complements nicely with our
private client.
4
So,
this says we just -- we've added a lot of people. I view the Weisel
merger as complementary, as I've talked about. We just were named
number one in Wall Street Journal's Best of the Street in terms of
research. The first firm outside of New York that's the number one
ranked Wall Street research firm. We were number two in StarMine. So,
we think that the marketplace, and certainly the buy side, is beginning
to recognize our research capabilities. I just -- I spoke of that --
that's on top of last year. We were the first firm ever in 2008 to be
number one, both in earnings accuracy and stock picking in StarMine.
Out of 260 firms, we ranked number one in both of those categories. So,
we again believe that our model, which is an agency-driven model, which
has as its foundation strong unbiased equity research, is going to
continue to drive our business.
...
On the
balance sheet side, again, $3 billion of assets versus $1 billion of
equity. So, a leverage ratio of about three times. I mean, that's
almost unheard of for a financial services firm. We simply do not
deploy financial leverage. We could, and we could put on a carry trade
that would increase our short-term return on equity and profitability,
but those can end badly, as we saw in 2008. So, we're going to stick
with our agency business.
This
shows how our capital -- you get to $1 billion, and that includes $80
million of trust preferred. But this is pre the Weisel transaction,
which will add about $200 million of equity when you take their deferred
tax assets. So again, we're very well capitalized.
...
And
then the other financial data is, today, with the combination of Weisel
we're over $100 billion in client assets.
So,
the last thing I'll talk about is something that we've been talking to
the analysts about, and that is what happens, what can happen if we --
and we're studying the effect of -- as many of the street have done,
they've modified their stock unit awards to make them retirements
eligible. The reason that we have to do this, many firms have done
this, is we've had to increase both the amount of equity awards or
deferred and the term. And that's sort of a best practice on the
street. You have to pay back and you have to have claw back
provisions. While that makes a lot of sense, when you get down to the
associate level people -- when you start saying you're going to defer
pay for five years, they want to know what happens if they retire. And
so, many firms have modified their current awards to make them
comparable. What that effectively does is it expenses prior unit
grants.
What
I've shown here is, if we would do that, what happens on a pro forma
basis. And our change in book value goes down 7 percent. This is all
non-cash. But our amortization we expense after tax is nearly $0.80
back to earnings per share. This is something I have talked about a
number of times, about what happens here. In our case, we issued so
many of our units higher than book you don't have a dilutive impact to
book, but you have this potential increase.
So,
this is something people should understand that we may do. The Weisel
Group had already done it. Jefferies had done -- a number of firms have
already done this. And if we do this, I just want people to understand
the non-cash aspect, one; and two, that this will sort of unmass our
cash earnings per share, which I've talked about for a few years.
Looking forward, we're well positioned. Simply well -- dislocation,
what's going on in Washington, what's going to happen to business, what
financial services reform is going to do. We're very well positioned
and continue to build as we have in the past. And we'll continue to
drive value for all of our shareholders, clients, associates,
shareholders alike. We believe we can do that.
The
last thing before I take any questions, I will address this morning's
Wall Street Journal article on auction rate securities, if you didn't
see that. I will just say that I was fully aware of the situation. It
has no impact on the transaction. I'll go on further to state that
while we certainly don't -- I don't want to say that what happened, that
it was right. I don't know all the facts. But if you read what was
said, I wouldn't condone what happened.
5
What I
do know that happened, in my due diligence, is that as soon as the
management team found out what happened, they made the clients whole.
So, there's been no money lost. Clients were made whole. And you have
that article today which is somewhat sensational, in my perspective.
But the important thing is that the matter's resolved on the client
side. And from my perspective, it has no impact on our future
transaction with Weisel, which again I expect to close in the end of the
second quarter.
So
with that, I've got five minutes for questions if anyone would like to
pose a question.
Question from an
unidentified participant and the response of Mr. Kruszewski:
Can
you talk a little bit about how you differentiate yourself from your
competition in terms of retaining acquired institutions in light of the
fact that Weisel has a large investment banking operation? Thanks.
Mr. Kruszewski
...
On the
retention side, again, it's about opportunity. People want -- are going
to work where they believe they can serve their clients and then they
can do well if they do well. We provide that opportunity to all the
Weisel people. We went out, we agreed -- we signed the agreement on
Sunday, but that agreement was predicated on making sure that the
partners at Weisel wanted to do the deal. Of course, they didn't know
about it until Friday after the close when we started talking to them.
So,
Tom and his team went out to -- I think it was initially 60 people, Tom,
in--? Fifty, thank you. Fifty of the key people, of which 48 of them
signed by Sunday night to stay on. We only asked for a year. We'd say
that we want you to agree to a year. After that, all bets are off. Our
history has shown that, give us a year they'll stay. And they're
onboard. And so, you're not going to see people -- key people will not
be departing, and this will work and we'll see how it plays out. But
I'm pretty confident that we have a platform where people can compete
and win. And you want to keep people in our business, let them compete
and let them win. That'll do it. And then pay them, of course. But
that competing and winning is as important.
...
Any
other questions? Alright. Thank you for your time. And look forward
to getting our transaction completed with Tom and his team. And I think
good things are going to come for the shareholders of Stifel. Thank you
very much.
6
Forward-Looking
Statements:
Statements in this
communication that relate to Stifel Financial Corp., as well as Stifel,
Nicolaus and Company, Inc. and its other subsidiaries (collectively,
"Stifel" or the "Company") and Thomas Weisel Partners Group, Inc.
("Thomas Weisel Partners") future plans, objectives, expectations,
performance, events and the like may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Future events, risks and uncertainties, individually or in the
aggregate, could cause our actual results to differ materially from
those expressed or implied in these forward-looking statements. Neither
Stifel nor Thomas Weisel Partners undertakes any obligation to update
any forward-looking statements to reflect events that occur or
circumstances that exist after the date on which they were made.
The material factors and
assumptions that could cause actual results to differ materially from
current expectations include, without limitation, the following: (1) the
inability to close the merger in a timely manner; (2) the inability to
complete the merger due to the failure to obtain stockholder approval
and adoption of the merger agreement and approval of the merger or the
failure to satisfy other conditions to completion of the merger,
including required regulatory and court approvals; (3) the failure of
the transaction to close for any other reason; (4) the possibility that
the integration of Thomas Weisel Partners' business and operations with
those of Stifel may be more difficult and/or take longer than
anticipated, may be more costly than anticipated and may have
unanticipated adverse results relating to Thomas Weisel Partners' or
Stifel's existing businesses; (5) the challenges of integrating and
retaining key employees; (6) the effect of the announcement of the
transaction on Stifel's, Thomas Weisel Partners' or the combined
company's respective business relationships, operating results and
business generally; (7) the possibility that the anticipated synergies
and cost savings of the merger will not be realized, or will not be
realized within the expected time period; (8) the possibility that the
merger may be more expensive to complete than anticipated, including as
a result of unexpected factors or events; (9) the challenges of
maintaining and increasing revenues on a combined company basis
following the close of the merger; (10) diversion of management's
attention from ongoing business concerns; (11) general competitive,
economic, political and market conditions and fluctuations; (12) actions
taken or conditions imposed by the United States and foreign
governments; (13) adverse outcomes of pending or threatened litigation
or government investigations; and (14) the impact of competition in the
industries and in the specific markets in which Stifel and Thomas Weisel
Partners, respectively, operate.
Additional factors that may
cause results to differ materially from those described in the forward-looking
statements are set forth in the Annual Report on Form 10-K of Stifel for the
year ended December 31, 2009, which was filed with the Securities and Exchange
Commission ("SEC") on February 26, 2010, under the heading "Item 1A-Risk
Factors," in the Annual Report on Form 10-K of Thomas Weisel Partners for the
year ended December 31, 2009, which was filed with the SEC on March 12, 2010,
under the heading "Item 1A-Risk Factors," in the Registration Statement on Form
S-4 filed by Stifel on April 28, 2010, under the section titled "Risk Factors,"
and in subsequent reports on Forms 10-Q and 8-K and other filings made with the
SEC by each of Thomas Weisel Partners and Stifel.
7