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Stifel Inks Deal to Acquire GMP's Capital Markets Business

Zacks Equity Research

Stifel Financial Corporation SF has entered into an all-cash deal to acquire the capital markets business, excluding the U.S. cannabis and certain clearing businesses, of GMP Capital. The acquisition is expected to close in fourth-quarter 2019.

Toronto-based financial services provider GMP’s capital markets business offers investment banking services, including equity capital raising, mergers & acquisitions advisory, institutional sales and trading and research services through offices in Canada and the United Kingdom.

GMP is well recognized in small to mid-cap segments of the Canadian capital markets, which will aid Stifel in establishing strong foothold in the country. The company struck a deal after recognizing that Canada ranks fourth globally in terms of investment banking fees earned.

Per the terms, cash consideration will be determined at closing, calculated as the tangible common equity of the business, plus a premium of $33.8 million (C$45.0 million). As of Apr 30, 2019, the purchase price would have been nearly $52 million (C$70 million).

Notably, Harris Fricker, CEO of GMP, and other key personnel at GMP will be joining Stifel upon closing of the deal. 

“The addition of GMP further enhances our institutional business given its strength in the Canadian markets and within the technology, healthcare, cannabis and energy verticals,” said Ronald J. Kruszewski, Chairman and CEO of Stifel.

Also, Kruszewski stated that the company has benefited consistently over the years from strategic acquisitions and strong organic growth.

Stifel remains focused on building its investment banking capabilities. In April, the company had announced plans to acquire Mooreland Partners, a leading M&A and private capital advisory firm serving the global technology industry.

Through this acquisition, the company was successful in doubling the size of its overall technology practice and expanded presence in Europe and Silicon Valley.

Conclusion

Stifel’s inorganic growth activities reflect capital strength and efforts to bolster performance. Also, it has diversified revenue sources, which are likely to support the bank’s financials. Additionally, the company will benefit from improving conditions in the domestic economy.

Over the past year, shares of Stifel have gained 42.3%, outperforming the industry’s rally of 6.5%.

The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A few stocks from the finance space worth a look E*TRADE Financial Corporation ETFC, Evercore EVR and Raymond James Financial RJF. All these stocks are currently carrying a Zacks Rank #2 (Buy).

Over the past 60 days, E*TRADE has witnessed 1.6% upward earnings estimate revision for the current year. Its shares have gained 4.8% in the past six months.

Evercore’s earnings estimates for 2019 have been revised 3.1% upward over the past 60 days. Shares of the company have gained 24.2% in the past six months.

Raymond James earnings estimates for the current year have been revised 2% upward over the past 60 days. Shares of the company have gained 15.3% in the past six months.

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