|[January 10, 2014]
Hilltop Holdings Inc. Proposes to Acquire SWS Group, Inc. for $7.00 Per Share
DALLAS --(Business Wire)--
Hilltop Holdings Inc. (NYSE: HTH) submitted a written proposal to the
SWS Group, Inc. Board of Directors to acquire all of the outstanding
shares of SWS that it does not already own for $7.00 per share in 50%
cash and 50% Hilltop common stock.
In 2011, Hilltop invested $50 million in SWS in the form of a senior
unsecured loan. At the time of Hilltop's investment, Hilltop's Chairman,
Gerald J. Ford, joined the Board of Directors of SWS and Hilltop's
President and Chief Executive Officer, Jeremy B. Ford, became a
non-voting observer to the SWS board. In conjunction with Hilltop's
investment in SWS, SWS issued Hilltop a warrant to purchase 8,695,652
common shares of SWS at an exercise price of $5.75 per share. Hilltop
currently beneficially owns 24% of SWS common stock, inclusive of the
Mr. Gerald J. Ford said, "We believe that Hilltop's and SWS's businesses
are highly complementary, and that the proposed transaction is a
compelling opportunity for SWS's stockholders, as well as its employees
and customers. The transaction represents a premium to market for SWS
stockholders, while also enabling stockholders to participate in the
continued growth of the combined enterprise. In addition, we believe it
will create benefits from being part of a larger organization that is
strongly capitalized and positioned to compete on an expanded scale."
Hilltop management has a track record of successfully executing
acquisitions and integrating new assets, operations and personnel,
including its acquisition of PlainsCapital Corporation completed in
December 2012 and the FDIC-assisted acquisition of First National Bank
of Edinburg in September 2013. Hilltop currently has over $9 billion in
assets, $1.2 billion of equity and approximately 4,750 employees.
Hilltop is prepared to expeditiously negotiate a definitive acquisition
agreement with the SWS Board of Directors. Stephens Inc. is serving as
financial advisor to Hilltop and Wachtell, Lipton, Rosen & Katz is
serving as legal counsel to Hilltop.
The letter that Hilltop sent today to the SWS Board of Directors follows:
It has been a pleasure to work with SWS Group, Inc. since Hilltop
Holdings Inc. made its investment in the company in July 2011. We
sincerely appreciate our relationship and have genuine respect for your
employees and board. Therefore, we are excited to communicate our
interest in merging SWS into Hilltop and outline the significant terms
of our proposal. As our businesses are highly complementary, we believe
that a combination will generate significant benefits for both of our
customers, employees and stockholders.
Hilltop, a public financial holding company, currently has over $9
billion in assets, $1.2 billion of equity, approximately 4,750 employees
and significant excess capital. Through our operating companies, we have
four business segments-banking, mortgage origination, financial advisory
and insurance. Hilltop is led by its Chairman, Gerald J. Ford, who has
an established track record of acquiring financial institutions and
creating substantial stockholder value. Our 24% beneficial ownership
interest in SWS is important to us, as it prompted our desire to build a
premier Texas-based bank and prominent diversified financial services
company. Since, Hilltop has been very active, completing the acquisition
of PlainsCapital Corporation in November 2012 and the FDIC-assisted
acquisition of First National Bank of Edinburg in September 2013.
We believe that a combination would provide strategic benefits to both
SWS and Hilltop. The merger of First Southwest and Southwest Securities
would create the dominant Texas-based broker/dealer with significant
strengths in municipal finance and clearing. The combined broker/dealer
will be well positioned to compete and grow on an expanded platform.
Upon merging the two banks, PlainsCapital Bank would become the 4th
largest Texas-based bank by deposits. Hilltop's capital positionwould
maintain the strength of the combined bank and provide opportunities for
loan growth. Additionally, SWS stockholders would benefit from Hilltop's
diversified and profitable operating segments.
Our proposal is to acquire all of the outstanding SWS common stock that
Hilltop does not already own for $7.00 per share in 50% cash and 50%
stock. We believe that our proposal offers compelling value for SWS
stockholders, as it provides a premium to market, immediate and certain
value with the cash consideration and the opportunity to participate in
the success of the combined company through our stock.
Our proposal is subject to the approval of the SWS board of directors,
the execution of a definitive agreement and subsequent approval by SWS
stockholders. There will not be a financing contingency or any required
approvals by Hilltop stockholders. Our transaction, however, will be
further subject to customary and usual closing conditions, including
obtaining required approvals from regulators. Due to our existing
investment, we do not anticipate significant due diligence or any
obstacles in consummating a mutually beneficial transaction promptly.
The proposed transaction also will require the consent of Oak Hill
Capital Partners pursuant to existing debt and related agreements with
SWS. Accordingly, any transaction will be subject to such consent and
the restructuring of the existing debt and related agreements or, in the
alternative, the exercise of their warrant. We intend to commence those
discussions with Oak Hill immediately.
Consistent with our obligations under the U.S. federal securities laws,
this letter will become publicly available when we file it with an
amendment to our Schedule 13D.
We look forward to further discussing our proposal with you, and hope to
expeditiously enter into a definitive agreement.
Hilltop is a Dallas-based financial holding company. Through its wholly
owned subsidiary, PlainsCapital Corporation, a regional commercial
banking franchise, it has three operating subsidiaries: PlainsCapital
Bank, PrimeLending, and First Southwest Company. Through Hilltop's other
wholly owned subsidiary, National Lloyds Corporation, it provides
property and casualty insurance through two insurance companies,
National Lloyds Insurance Company and American Summit Insurance Company.
At September 30, 2013, Hilltop employed approximately 4,750 people and
operated approximately 400 locations in 45 states. Hilltop's common
stock is listed on the New York Stock Exchange under the symbol "HTH."
Find more information at hilltop-holdings.com and plainscapital.com.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause Hilltop's actual results,
performance or achievements to be materially different from any expected
future results, performance or achievements. Forward-looking statements
speak only as of the date they are made and, except as required by law;
Hilltop does not assume any duty to update forward-looking statements.
Such forward-looking statements include, but are not limited to,
statements about the benefits of the business combination transaction
involving Hilltop and SWS, including future financial and operating
results, the combined company's plans, objectives, expectations and
intentions and other statements that are not historical facts. The
following factors, among others, could cause actual results to differ
from those set forth in the forward-looking statements: (i) the
possibility that no agreement is entered into with respect to a
transaction, (ii) if an agreement is entered into, the transaction does
not close when expected or at all because required regulatory,
stockholder or other approvals and other conditions to closing are not
received or satisfied on a timely basis or at all, (iii) changes in
Hilltop's stock price before closing, including as a result of SWS's
earnings, broader stock market movements, and the performance of
financial companies and peer group companies, (iv) the risk that the
benefits from the transaction, if consummated, may not be fully realized
or may take longer to realize than expected, including as a result of
changes in general economic and market conditions, interest and exchange
rates, monetary policy, laws and regulations and their enforcement, and
the degree of competition in the geographic and business areas in which
SWS operates, (v) the ability to promptly and effectively integrate the
businesses of Hilltop and SWS, (vi) the reaction of the companies'
stockholders, customers, employees and counterparties to the proposed
transaction, and (vi) diversion of management time on
transaction-related issues. For more information, see the risk factors
described in Hilltop's Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other filings with the Securities and Exchange Commission
("SEC (News - Alert)").
In connection with the proposed transaction, Hilltop expects to file
with the SEC a registration statement on Form S-4 containing a proxy
statement/prospectus and other relevant documents regarding the proposed
transaction. The definitive proxy statement/prospectus will be mailed to
stockholders of SWS. INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF
AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. You may obtain a free copy of the proxy
statement/prospectus (if and when it becomes available) and other
relevant documents filed by Hilltop with the SEC at the SEC's website at www.sec.gov.
Copies of the documents filed by Hilltop with the SEC will be available
free of charge on Hilltop's website at www.hilltop-holdings.com
or by contacting Investor Relations at 214-252-4029.
Hilltop and its directors and executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction. You can
find information about Hilltop's executive officers and directors in
Hilltop's Annual Report on Form 10-K filed with the SEC on March 15,
2013 (as it may be amended from time to time) and its definitive proxy
statement filed with the SEC on April 30, 2013. Additional information
regarding the interests of such potential participants will be included
in the proxy statement/prospectus and other relevant documents filed
with the SEC if and when they become available. Investors should read
the proxy statement/prospectus carefully when it becomes available
before making any voting or investment decisions. You may obtain free
copies of these documents from Hilltop using the sources indicated above.
This document shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of Section 10 of the U.S. Securities Act of 1933, as amended.
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