Hilltop To Acquire SWS Group In Cash And Stock Deal - Update

(RTTNews) - Hilltop Holdings Inc. (HTH), a Dallas-based financial holding company, and SWS Group, Inc. (SWS) have entered into a definitive merger agreement to merge SWS with Hilltop in a cash and stock deal that equates to $7.88 per share.

SWS is a Dallas-based holding company offering a range of investment and financial services through its subsidiaries.

SWS shareholders will receive per share consideration of 0.2496 shares of Hilltop common stock and $1.94 of cash, equating to $7.88 per share based on Hilltop's closing price on March 31. The merger is expected to be completed before the end of 2014.

The agreement was recommended by the Special Committee of the SWS Board of Directors to the SWS Board of Directors and has been unanimously approved by the Boards of Directors of both companies.

Gerald Ford, Chairman of Hilltop, said, "This transaction creates the leading Texas-based broker/dealer and provides PlainsCapital Bank access to a significant source of additional core deposits. The merger will bolster our market share and scale for many business lines within our broker/dealer, as well as our deposit market share in Dallas/Fort Worth."

The combination is expected to provide a broad range of investment banking and related financial services to individual, corporate and institutional investors, broker/dealers, government entities and financial intermediaries.

The combined bank will have a stable and low cost funding profile and a more efficient operating platform, the companies said.

James Ross, President and CEO of SWS, said the transaction represents a 28 percent premium to the company's pre-announced market price. The Special Committee contacted numerous potential buyers and unanimously concluded that the transaction with Hilltop is in the best interests of stockholders.

Following the acquisition, Hilltop will remain well capitalized with excess cash to deploy on future transactions.

Hilltop acquired PlainsCapital Corp. in November 2012 and executed the FDIC-assisted acquisition of First National Bank of Edinburg in September 2013.

In 2011, Hilltop invested $50 million in SWS in the form of a senior unsecured loan. Gerald Ford joined the Board of Directors of SWS and Hilltop's President and Chief Executive Officer Jeremy Ford became a non-voting observer to the SWS Board.

In conjunction with Hilltop's investment in SWS, Hilltop was issued a warrant to purchase 8.7 million common shares of SWS at an exercise price of $5.75 per share. Hilltop currently beneficially owns 24 percent of SWS common stock, inclusive of the warrant.

Stephens Inc. acted as financial advisor to Hilltop, and Wachtell, Lipton, Rosen & Katz acted as legal advisor.

Sandler O'Neill & Partners, L.P. acted as financial advisor to the Special Committee of the SWS Board of Directors. Davis Polk & Wardwell LLP acted as its legal advisor. SWS, which closed up 0.4 percent on Monday, is climbing 9.8 percent in pre-market activity. HTH settled up 5.5 percent at $23.79.