The Edelman Financial Group To Go Private In $260 Million Deal

Harriet Davies

17 April 2012

Lee Equity Partners, a private equity firm, has offered to take the The Edelman Financial Group private in a deal worth nearly $260 million.

The private equity firm has signed a definite merger agreement with TEFG, a wealth management firm with some $17 billion in client assets, for $8.85 per share.

Lee Equity Partners will pay the per-share price in cash, representing a 43 per cent premium over TEFG’s Friday closing price of $6.18, and a 33 per cent premium over a volume-weighted average closing price over the last 20 trading days.

The transaction is expected to close in the third quarter of this year, upon which Edelman Financial will no longer trade on the Nasdaq.

Co-chief executives of TEFG, Ric Edelman and George Ball, along with other senior members of the firm’s management team, will stay in place after the completion of the merger and maintain a significant equity interest, according to the terms of the agreement.

Upon closing, Edelman will also sell his 24 per cent direct interest in The Edelman Financial Center, a 76-per cent owned subsidiary of TEFG, to an affiliate of Lee Equity Partners.

The agreement remains subject to certain closing conditions, “including the absence of a material adverse effect on TEFG’s business or results of operations and the receipt of applicable regulatory approvals,” TEFG said in its statement.

The merger agreement states that each issued and outstanding share of TEFG common stock will be cancelled in exchange for the right to receive $8.85 in cash, except for certain shares beneficially owned by management and TEFG employees that will be rolled over and contributed to the new holding company, as well as shares held by shareholders who properly exercise and perfect appraisal rights.

The agreement must be approved by two-thirds of the outstanding shares of TEFG’s common stock and a majority of the outstanding shares of the firm’s common stock held by unaffiliated shareholders. Members of TEFG’s senior management - who account for around 26 per cent of outstanding shares - have agreed to vote in favor of the merger.

A special committee of TEFG’s board of directors, which negotiated the agreement, now has a 40-day period to invite offers from third parties, with a 20-day extension available for parties “meeting certain additional requirements specified in the merger agreement,” the statement said. If a superior offer is made TEFG can terminate the proposed merger with Lee Equity Partners for a fee, although the private equity firm also has a right to match the offer.