Ladenburg Thalmann Financial Services Inc.

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 8, 2014 Ladenburg Thalmann Financial Services Inc. (Exact name of registrant as specified in its charter) Florida (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 4400 Biscayne Blvd., 12th Floor, Miami, Florida (Address of principal executive offices) (Zip Code) Registrant s telephone number, including area code: (212) Not Applicable Former name or former address, if changed since last report Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 Top of the Form Item 1.01 Entry into a Material Definitive Agreement. On August 8, 2014, Ladenburg Thalmann Financial Services Inc. (the "Company") entered into a stock purchase agreement (the "Purchase Agreement") with KMS Financial Services, Inc. ("KMS") and the shareholders of KMS (the "Shareholders"), pursuant to which the Company has agreed to acquire all of the issued and outstanding capital stock of KMS (such acquisition, the "Transaction"). KMS is a Seattle-based independent broker-dealer and registered investment advisor with a strong presence in the Pacific Northwest. Mark Hamby, KMS s Chairman and CEO, Eric Westberg, its President and COO, and the rest of the KMS management team will continue to operate KMS as a stand-alone business based in its current headquarters in Seattle, Washington. Summary of Purchase Agreement Terms: Transaction Consideration. Under the terms of the Transaction, the Company agreed to pay to the Shareholders approximately $24,000,000, consisting of $11,000,000 in cash, $8,000,000 principal amount of the Company's promissory notes and 1,440,922 shares of the Company's common stock, which will be subject to certain transfer restrictions. The promissory notes will be unsecured, will bear interest at a rate equal to the IRS applicable federal rate as of the closing date for mid-term obligations having quarterly payments (compounded quarterly) and will be payable in sixteen equal quarterly installments. The promissory notes may be prepaid in full or in part at any time without premium or penalty. The holders may accelerate the promissory notes upon certain typical events of default. Representations and Warranties; Covenants. The Purchase Agreement contains customary representations and warranties of the parties. The Purchase Agreement also contains customary covenants and agreements. Restrictive Covenants. Each of the Shareholders is subject to a restrictive covenant relating to competition in the securities brokerage, investment advisory, asset management and life insurance marketing businesses and to a non-solicitation covenant covering executives, employees, clients, customers, consultants and registered representatives of KMS, the Company or any affiliate of the Company. Each of the Shareholders is also subject to a restrictive covenant preventing them from registering with any broker-dealer or affiliating with any registered investment adviser other than KMS or an affiliate of the Company. The restrictive covenants run until (i) the later of (x) the fifth anniversary of the closing date, or (y) the second anniversary of the last day of their employment with KMS or an affiliate thereof, in the case of certain principal Shareholders or (ii) the later of (x) the second anniversary of the closing date, or (y) the first anniversary of the last day of their employment with KMS or an affiliate thereof, in the case of each of the other Shareholders. Indemnification. Subject to certain limitations, the Shareholders have agreed, following the closing of the Transaction, to indemnify the Company for losses arising out of breaches of their individual representations, warranties and covenants, to the extent of his or her portion of the Transaction consideration. Certain principal Shareholders will jointly and severally indemnify the Company for losses arising from the inaccuracy of any representation or warranty made by KMS or such Shareholder, the non-fulfillment or breach of any covenant by KMS or such Shareholder and, subject to certain limitations, the conduct of the business prior to the closing of the Transaction (except with respect to liabilities arising from pre-closing conduct for which adequate reserves are made on KMS financial statements). Employment Agreements. At the signing, certain of KMS key employees, including members of its senior management, entered into management employment agreements with KMS. The employment agreements for the KMS employees who are not also Shareholders contain restrictive covenants similar to those found in the Purchase Agreement that run until the later of (i) two years after the closing date and (ii) one year after the termination of his or her employment. Closing Conditions. The consummation of the Transaction is subject to certain conditions, including, among others, those relating to the accuracy of the parties representations and warranties, the receipt of all required approvals and consents, including from FINRA and the NYSE MKT, and other customary closing conditions. The Purchase Agreement contains specified termination rights for both the Company and KMS. The above description of the Purchase Agreement does not purport to be a complete statement of the parties rights and obligations thereunder and the transactions contemplated thereby. Item 3.02 Unregistered Sales of Equity Securities. The information set forth in Item 1.01 is incorporated by reference herein. The Company intends to issue the shares of the Company s common stock issued under the Purchase Agreement in reliance on an exemption from registration afforded by Rule 506 of Regulation D promulgated under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act").

3 Item 8.01 Other Events. On August 11, 2014, the Company issued a press release announcing the Transaction. A copy of that press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference in this Item Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit No Description 99.1 Press release dated August 11, 2014 issued by Ladenburg Thalmann Financial Services Inc.

4 Top of the Form SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Ladenburg Thalmann Financial Services Inc. August 13, 2014 By: /s/ Brett H. Kaufman Name: Brett H. Kaufman Title: Senior Vice President and Chief Financial Officer

5 Top of the Form Exhibit Index Exhibit No. Description 99.1 Press release dated August 11, 2014 issued by Ladenburg Thalmann Financial Services Inc.

6 FOR IMMEDIATE RELEASE CONTACT: Kris Kagel JCPR (973) LADENBURG THALMANN TO ACQUIRE KMS FINANCIAL SERVICES Leading Seattle-Based Independent Broker-Dealer Will Strengthen Ladenburg s Position in Pacific Northwest Transaction to Add Over $14 Billion in Client Assets and Approximately 325 Independent Financial Advisors and $84 Million in Revenue Ladenburg Will Have Approximately $110 Billion in Client Assets, 3,500 Independent Financial Advisors and $1 Billion of Annual Revenues Upon Closing of Pending Acquisitions Miami, FL August 11, 2014 Ladenburg Thalmann Financial Services, Inc. (NYSE MKT: LTS, LTS PrA) ( Ladenburg ), a publicly-traded diversified financial services company, announced today it has signed a definitive agreement to acquire KMS Financial Services, Inc. ( KMS ), a leading Seattle-based independent broker-dealer and investment advisor with a strong presence in the Pacific Northwest. Under the terms of the transaction, Ladenburg will pay approximately $24 million, consisting of $11 million of cash, $8 million of four-year notes and 1,440,922 shares of Ladenburg common stock. This transaction is part of Ladenburg s ongoing strategy to strengthen its position as an industry-leading network of independent brokerage and advisory firms and its market share in the industry. Founded in 1971, KMS has approximately 325 independent financial advisors with over $14 billion in client assets and revenues of approximately $84 million for the 12 months ended June 30, Upon completion of the transaction, Mark Hamby, KMS s Chairman and CEO, Eric Westberg, its President and COO, and the rest of the KMS management team will continue to operate KMS as a stand-alone business based in its current headquarters in Seattle, Washington. With the KMS acquisition and Ladenburg s recently-announced, pending acquisition of assets of Sunset Financial Services, Inc., Ladenburg s network of independent brokerage and advisory firms will total approximately 3,500 financial advisors with $110 billion in total client assets and Ladenburg will have annual revenues of approximately $1 billion. The KMS transaction will give Ladenburg a significantly expanded presence in the Pacific Northwest. This transaction shows Ladenburg s commitment to the proposition that the independent brokerage and advisory business is one of the most dynamic areas of the financial services industry, said Dr. Phillip Frost, Ladenburg s Chairman of the Board and principal shareholder. We value the unique culture of KMS and believe that they will be a natural fit for the businesses we are building at Ladenburg. KMS has been owned and operated by its key managers for more than 40 years, and has established itself as a client focused firm committed to helping mainstream investors reach their financial goals, said Richard Lampen, Ladenburg s President and CEO. As a part of the Ladenburg family, KMS will retain its distinct brand while gaining the advantages of access to the differentiated products and services offered to our independent advisors, enabling them to meet evolving client needs, stay competitive and further grow their business. We have been impressed by Ladenburg s record of acquiring independent brokerage and advisory firms with distinct cultures and helping them pool their collective strengths to capitalize on growth opportunities, said Mr. Hamby. Joining Ladenburg s alliance of firms points to a dynamic future for the culture we ve developed over KMS s first 43 years. KMS will leverage the financial benefits and strength that Ladenburg possesses as an established public company. In addition, KMS advisors will have access to the differentiated products and services that Ladenburg brings to the independent channel, including: access to investment banking and capital markets resources, institutional quality equity research, a fixed-income trading desk, wealth management services through Ladenburg Thalmann Asset Management, specialized point-of-sale support for life insurance products through Highland Capital Brokerage, and advisor-friendly trust services through Premier Trust. Ladenburg acquired its first independent broker-dealer firm in 2007 and its subsidiaries today include Securities America,

7 Triad Advisors and Investacorp. Like these firms, KMS will retain its special culture and management team, while benefitting from the wide array of investment products, services, technology and practice management support that define Ladenburg s commitment to the independent broker-dealer and advisory space. Ladenburg s acquisition of KMS is expected to close later this year, and is subject to regulatory approval and other customary closing conditions. Approval by Ladenburg s shareholders is not required. Graubard Miller served as legal counsel for Ladenburg in the transaction, and Aery Advisors served as counsel for KMS. About Ladenburg Thalmann Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS, LTS PrA) is a publicly-traded diversified financial services company based in Miami, Florida. Ladenburg s subsidiaries include industry-leading independent broker-dealer firms Securities America, Inc., Triad Advisors, Inc. and Investacorp, Inc. as well as Premier Trust, Inc., Ladenburg Thalmann Asset Management, Highland Capital Brokerage, Inc., a leading independent life insurance brokerage company, and Ladenburg Thalmann & Co. Inc., an investment bank which has been a member of the New York Stock Exchange for 135 years. The company is committed to investing in the growth of its subsidiaries while respecting and maintaining their individual business identities, cultures, and leadership. For more information, please visit About KMS Financial Services Founded in 1971, KMS Financial Services Inc. is a registered broker-dealer and investment advisory firm located in Seattle, WA, serving clients through a network of approximately 325 investment professionals nationwide. The firm provides established professionals with access to a wide range of non-proprietary investment and insurance products, custodial brokerage platforms, institutional investment management, and technology systems support. KMS is based in Seattle, Washington, and is a member of the Financial Industry Regulatory Authority (FINRA) and Securities Investor Protection Corporation (SIPC). For more information, please visit This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth, future growth of the independent brokerage and advisory industry, future synergies, and expected closing of the transaction. These statements are based on management s current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of the Company s business. These risks, uncertainties and contingencies include those set forth in the Company s annual report on Form 10-K for the fiscal year ended December 31, 2013 and other factors detailed from time to time in its other filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. ###