Rodman & Renshaw Capital Group Inc., New York, (Nasdaq: RODM) plans to acquire Hudson Holding Corp. (OTCBB: HDHL), the parent of Hudson Securities Inc., which provides a full range of corporate finance, advisory and capital markets services and institutional equity research focused on the small- and mid-cap marketplace, for approximately $7 million in an all-stock transaction.
The combination will expand and diversify Rodman's product and service offerings, strengthening its position as a leading investment bank for growth companies with an estimated sales, trading and investment banking revenue of approximately $130 million.
Each Hudson share will be exchanged for 0.0338 shares of Rodman common stock, based on a $2.69 valuation per share of Rodman's stock.
As of year-end 2010, Rodman generated approximately $87 million of investment banking revenue, and approximately $4 million of commission revenue, including approximately $22 million of investment banking revenue and approximately $1 million of commission revenue in fourth-quarter 2010.
Hudson generated approximately $34 million of sales, trading and commission revenue, and approximately $2 million of investment banking revenue during the twelve month period ended Sept. 30, 2010. Rodman generated approximately $90 million of investment banking revenue and approximately $4 million of commission (sales and trading) revenue for the twelve months ended Sept. 30, 2010.
The acquisition of Hudson is expected to bring substantial diversification to Rodman's business platform through Hudson's sales and trading franchise. Hudson currently makes markets in more than 12,000 stocks as a liquidity provider to more than 400 institutions, hedge funds and asset managers, complementing its 200 broker-dealer clients.
In addition to being a top market maker in small-cap stocks, Hudson's product offering includes global execution capabilities in more than 30 markets around the world, a full-service equity derivatives desk, expertise in trading distressed equities, commission management and client DMA (direct market access). On a combined basis, Rodman will provide coverage on more than 280 companies. As well, Rodman will also office in Jersey City, Norwalk, Connecticut, Boston, Chicago, Cleveland, Houston, Boca Raton, Florida and Tinton Falls, New Jersey.
Substantial operating cost savings and efficiencies are expected to be achieved following a transition and integration period. As a result, Rodman expects the transaction to be neutral to earnings by the fourth quarter of 2011 and accretive in 2012.
Rodman will also benefit as a result of senior executives of Hudson joining Rodman. Upon the completion of the transaction, Anthony Sanfilippo, currently Hudson's chief executive officer, will become president of Rodman and a member of its board. In addition, Ajay Sareen, currently Hudson's chief administrative officer, will become Rodman's chief operating officer. Each will report to Edward Rubin, Rodman's chief executive officer.
Rodman chief executive Edward Rubin says, "We expect to leverage the acquisition by expanding the combined platform's market making and trading capabilities and to enhance our client service ability by hiring seasoned sales and trading professionals so that we can broaden our current product distribution and expand into new markets. I am also extremely excited that Tony Sanfilippo and Ajay Sareen will be joining our executive leadership team and I look forward to welcoming their Hudson colleagues to the Rodman family. Tony and Ajay have over 50 years of combined experience in building sales and trading platforms, including at Knight and Jefferies."
Anthony Sanfilippo, Hudson CEO, adds, "I am very excited by the proposed transaction and joining Rodman's leadership team. Bringing Hudson's notable sales and trading platform and industry experience to the Rodman business platform will enhance the scope of products and services we can offer to our combined client base. Both Rodman and Hudson serve as liquidity providers for small-cap companies and the combination will facilitate our ability to bring complimentary products and services to our clients. We could not have sought a better partner in terms of corresponding skills, culture and future vision and we look forward to creating the leading investment bank for growth companies."
New Century Capital Partners Inc. is the exclusive financial advisor to Hudson and has provided a fairness opinion to its board. The deal is expected to close in second-quarter 2011.
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