Acquisition of SWS Group, Inc. by Hilltop Holdings, Inc. May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of SWS Group, Inc. (NYSE: SWS) (“SWS”) by Hilltop Holdings, Inc. (NYSE: HTH). On April 1, 2014, the companies announced the signing of a definitive merger agreement pursuant to which SWS shareholders will receive 0.2496 shares of Hilltop common stock and $1.94 of cash, for each share of SWS stock, for a total consideration of $7.88 per share.
Is the Proposed Acquisition Best for SWS and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at SWS is undertaking a fair process to obtain maximum value and adequately compensate SWS shareholders.
As an initial matter, the $7.88 merger consideration represents a premium of less than 30% based on SWS’s closing price of $6.06 on January 9, 2014, the day before it was announced that Hilltop had made its initial proposal to acquire SWS. This premium is significantly below the median one month premium for comparable transactions in the last year. Further, the merger consideration is below the target price of $8.00 set by an analyst at Keefe, Buyette & Woods on January 12, 2014. In addition, SWS has recently traded as high as $8.29 on February 19, 2014, closing at $8.17 on the same day.
Notably, Hilltop invested $50 million in SWS in 2011 in the form of a senior unsecured loan and received additional warrants to purchase 8,695,652 common shares of SWS at an exercise price of $5.75 per share. Including the warrants, Hilltop has a 24% ownership position in SWS, raising the concern that Hilltop is receiving preferential treatment in its acquisition of SWS. Moreover, Hilltop’s Chairman, Gerald J. Ford, is a member of the SWS board of directors, and Hilltop’s President and Chief Executive Officer, Jeremy B. Ford, was made a non-voting observer to the SWS board.
Given these facts, Robbins Arroyo LLP is examining the SWS board of directors’ decision to sell the company to Hilltop. SWS shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
SWS shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.