Lee Equity to Buy Edelman Financial –UPDATED

The Edelman Financial Group said Monday that it has agreed to sell itself to Lee Equity Partners for $8.85 a share cash. The offer represents a 43% premium to Edelman’s closing share price of $6.18 Friday. The transaction is expected to close in third quarter. Houston-based Edelman Financial is a wealth management firm. Ric Edelman and George Ball, Edelman’s co-CEOs, will continue in their roles once the deal closes. The offer also includes a 40 day go-shop where Edelman’s special committee can solicit alternative offers from third parties. UPDATE: Kerry North and Robert Ulrey of  Stephens Inc. provided financial advice to Edelman’s special committee.

PRESS RELEASE

The Edelman Financial Group Inc. (“TEFG” or the “Company”) (NASDAQ: EF), a nationwide wealth management firm, today announced that it has entered into a definitive merger agreement with affiliates of Lee Equity Partners, LLC, a private equity firm, to be acquired for $8.85 per share in cash. This represents a premium of 43% over TEFG’s closing price Friday of $6.18, and a premium of 33% over TEFG’s volume-weighted average closing price over the last 20 trading days.
The Edelman Financial Group Co-Chief Executive Officers Ric Edelman and George Ball, and other members of TEFG’s senior management team, will continue in their roles with the Company after completion of the transaction and, pursuant to the terms of the transaction, maintain a significant equity investment in TEFG. Simultaneously with the closing of the transaction, Mr. Edelman will also be selling his 24% direct interest in The Edelman Financial Center, LLC (“EFC”), a 76%-owned subsidiary of TEFG, to an affiliate of Lee Equity Partners on substantially the same terms provided by the existing Limited Liability Company Agreement of EFC.
The merger agreement was negotiated on behalf of TEFG by a Special Committee of its Board of Directors composed entirely of independent directors with the assistance of independent financial and legal advisors. Following the Special Committee’s unanimous recommendation, TEFG’s Board of Directors unanimously approved the merger agreement and has recommended that TEFG’s shareholders adopt and approve the merger.
Thomas H. Lee, President of Lee Equity Partners, said, “The Edelman Financial Group has achieved a strong track record and is a clear leader in the independent financial advisor field. We are excited to partner with Edelman Financial’s management team, and we look forward to supporting the company’s continued expansion.”
Under terms of the merger agreement, each issued and outstanding share of TEFG’s 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, and shares held by shareholders who properly exercise and perfect appraisal rights.
The merger agreement must be approved by a two-thirds majority of the outstanding shares of TEFG’s common stock and by a majority of the outstanding shares of TEFG’s common stock held by unaffiliated shareholders. Members of the Company’s senior management, who currently own approximately 26% of TEFG’s outstanding shares, have agreed to vote their shares in favor of the merger. This voting obligation will terminate if the merger agreement terminates.
The Special Committee will solicit alternative transaction proposals from third parties for a period of 40 days after today subject to extension for an additional 20 days for parties meeting certain additional requirements specified in the merger agreement (a “Go-Shop Party”). To the extent the Special Committee determines that an alternative transaction proposal is superior to the merger with Lee Equity Partners, TEFG may terminate the merger agreement and accept the superior proposal. In such an event, TEFG must pay Lee Equity Partners a customary termination fee that varies in amount depending on whether or not the superior proposal is with a Go-Shop Party. In addition, the merger agreement provides Lee Equity Partners a customary right to match a superior proposal.
The proposed transaction is expected to close in the third quarter of 2012.The merger agreement is 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. Lee Equity Partners has obtained financing commitments for equity and debt financing in an aggregate amount sufficient to complete the merger.
Following completion of the transaction, TEFG will become a privately held company and its stock will no longer trade on the Nasdaq Stock Market.
Stephens Inc. is acting as financial advisor to the Special Committee, including with respect to the “go shop” process described above, and has delivered a fairness opinion to the Special Committee in connection with the transaction. Vinson & Elkins LLP is acting as legal advisor to the Special Committee. Thompson & Knight LLP is acting as legal advisor to The Edelman Financial Group. Fried, Frank, Harris, Shriver & Jacobson LLP is acting as legal advisor to Lee Equity Partners. Ric Edelman is represented in the transaction by Paul, Weiss, Rifkind, Wharton & Garrison LLP.
About The Edelman Financial Group
The Edelman Financial Group is a wealth management company with approximately 500 employees in 43 offices throughout the United States, and has approximately $17 billion in client assets. Client assets include the gross value of assets under management directly or via outside managers and assets held in brokerage accounts for clients by outside clearing firms. Additional information is available at www.edelmanfinancial.com.
About Lee Equity Partners
Lee Equity Partners is a middle-market private equity investment firm managing more than $1 billion of capital. Lee Equity was founded by Thomas H. Lee and focuses on control buyouts and growth capital financings, typically investing $30 million to $150 million per transaction in companies with enterprise values of $100 million to $500 million. The firm seeks to partner with top-tier management teams to build companies with differentiated market position and high growth potential. Target sectors include business services, consumer/retail, distribution/logistics, financial services, healthcare services, and media.

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