Hilltop Holdings Inc (NYSE:HTH) Expresses Formal Interest To SWS Group Inc (NYSE:SWS)

Posted by: : Viraj ShahPosted on: January 10, 2014 Hilltop Holdings Inc (NYSE:HTH) Expresses Formal Interest To SWS Group Inc (NYSE:SWS)

Hilltop Holdings Inc (NYSE:HTH) has expressed formal interest to the board of Directors of SWS Group Inc (NYSE:SWS) to acquire the outstanding shares from current shareholders of the later. The home and casualty insurer has offered to exchange each outstanding share of the full service corporate brokerage for $7 each. Fifty percent of the consideration will be paid in cash while the remaining will be paid in stock.

The proposed takeover follows on from the senior debt, which Hilltop invested in the SWS Group Inc (NYSE:SWS) Group Inc during 2011. Following the debt agreement, SWS Group Inc (NYSE:SWS) had issued warrants to Hilltop Holdings Inc (NYSE:HTH) entitling the later to buy 8,695,652 ordinary shares at the exercise price of $5.75 each. Overall, Hilltop beneficially holds an ownership stake of 24% in the common stock of SWS Group either directly or in the form of options or warrants.

Hilltop Holdings Inc (NYSE:HTH) currently offers banking, insurance, financial advisory and mortgage origination services for its clients. With the proposed merger to SWS the company seeks to expansion into full scale diversified financial services company. The ownership of a 24% stake in its associate has acted as a catalyst for the bank’s expansion plans in the past also. HTH’s already runs a Texas based construction banking which offers mortgage lending and commercial loans in the Texas market.

The offer letter to SWS Group Inc (NYSE:SWS) board also highlighted two major advancements in the Hilltop Holdings Inc (NYSE:HTH) expansion plans. Hilltop Holdings Inc (NYSE:HTH) intends to combine the First SouthWest and SouthWest Securities into a larger broker dealer and set up for the Texas area. The proposed merged bank “PlainsCapital” is expected to have fourth largest deposit backing in Texas banking sector. The biggest attraction for ordinary stockholder in SWS Group Inc (NYSE:SWS) is the diversification of risk, as the combined entity will cover diversified business operations and a wider ambit.

Following an accord from the directors, both parties will sign a preliminary definitive agreement setting forth the terms of the deal. This will further require approval from shareholders of SWS in their general meeting.

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Viraj Shah

Analyst at HEFFX
HEFFX Trading Room is lead by Shayne Heffernan and research from the Trading Desk is prepared by contributor Cyrus, Cyrus has done a M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.
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