(Reuters) – Cowen Group Inc (COWN.O) said it agreed to merge with privately held asset manager Ramius LLC in an all stock deal, three months after its rival Rodman & Renshaw Capital Group Inc (RODM.O) terminated an offer to buy the boutique investment bank.
Cowen shares shot up 45 percent to $7 in early trade Thursday on Nasdaq.
Under the deal, Ramius and a third party investor in Ramius will get 37.54 million and 2.71 million, respectively, of Cowen common shares. This represents 71.24 percent of the new company.
As part of the deal, Ramius will contribute substantially all of its assets and liabilities to an unit of the new company in exchange for its stock.
“Assuming Ramius’ asset under management’s are stable, we view the deal as economically attractive to Cowen shareholders,” Fox-Pitt Kelton analyst David Trone wrote in a research note, adding that Cowen shareholders would get a disproportionate share of the new company’s earnings and full book valuation.
“Cowen has been loss making for years — even in 2006, it only earned about $20 mililion. Meanwhile, we estimate that Ramius earns at least double that,” Trone said.
Cowen, a venerable Wall Street name that has lost money since it was spun off by French bank Societe Generale (SOGN.PA) in 2006, had in December rejected Rodman’s offer to buy the company for $7 a share, or nearly $100 million.
Based on Cowen’s Wednesday closing price of $4.84, the deal with Ramius is valued at about $194.8 million.
The new company will retain the Cowen Group Inc name and its shares are expected to continue to trade on Nasdaq. Ramius will continue as its investment advisory unit.
In supplementary materials put on Cowen’s website, the company said it expects the deal to add to earnings in first full year of combined operations and targeted annual cost savings of at least $10 million.
“The combined headcount when we are all done will be lower,” Ramius Chief Executive Peter Cohen said in a conference call, adding that there is a potential for restructuring charges because the opportunities are going to be available to consolidate real estates.
The transaction is expected to close in the fourth quarter.
Ramius is a global alternative investment firm with about $7.7 billion in assets under management.
Ramius’ founder Peter Cohen will become the chief executive of the combined company and Cowen’s CEO Greg Malcolm will continue to remain in that capacity for the broker-dealer unit.
(Reporting by Supantha Mukherjee in Bangalore; Editing by Ratul Ray Chaudhuri, Jarshad Kakkrakandy)