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Raymond James Financial to Acquire TriState Capital Holdings for $1.1B

October 21, 2021, 07:22 AM
Filed Under: Mergers & Acquisitions

Raymond James Financial, Inc. and TriState Capital Holdings, Inc. have entered into a definitive agreement under which Raymond James will acquire TriState Capital in a combination cash and stock transaction, valued at approximately $1.1 billion.

“TriState Capital has a terrific, client-centric franchise focused on serving clients with premier private banking, commercial banking and niche investment management products and services,” said Paul Reilly, Chairman and CEO of Raymond James. “As we have followed the firm and management team over the past several years, including as its largest deposit client, we’ve admired its leadership position in offering securities-based lending through a scalable and robust technology platform. Importantly, this acquisition further illustrates our commitment to utilize excess capital through organic and inorganic growth that we expect to drive strong returns for shareholders over the long term.”

“We founded TriState Capital 14 years ago because we saw an incredible opportunity to build a successful company built on a commitment to independence, a long-term perspective, integrity, and putting clients squarely at the center of everything we do and every decision we make,” said Jim Getz, Chairman and CEO of TriState Capital Holdings. “Raymond James shares those values and allows us to be part of one of the most highly regarded financial services companies in the nation. Our clients will continue to benefit from working with the same talented teams and the TriState Capital and Chartwell brands they already know so well, along with the technology we’ve invested in to provide an exceptional and responsive client experience. Raymond James’ strong balance sheet will provide supplemental capital and liquidity to continue enabling our fast-growing and highly scalable business model to meet clients’ commercial and securities-based lending and asset management needs.”

TriState Capital will continue operating as a separately branded firm and as a stand-alone division and independently chartered bank subsidiary of Raymond James, with Jim Getz remaining Chairman, Brian Fetterolf remaining TriState Capital Bank’s CEO and Tim Riddle remaining Chartwell’s CEO. Management and approximately 350 associates are expected to remain with the firm in its existing office locations to support TriState Capital’s continued growth and high service levels.

Key Strategic Highlights:

  • TriState Capital has grown private banking securities-based lending (SBL) organically at a 32 percent compound annual rate since 2017 and 39 percent over the last 12 months to $6.2 billion as of September 30, 2021. Supported by a leading digital lending platform and a robust risk management technology system, TriState Capital offers these loans to high-net-worth borrowers nationally by working with independent investment advisory firms, trust companies, broker-dealers, regional securities firms, family offices, insurance companies and other financial intermediaries
  • Raymond James provides TriState Capital with relatively low-cost capital and a stable funding base to enable continued and more profitable growth
  • The combination will provide TriState Capital additional resources to continue investing in its people, products and technology to further strengthen its client relationships
  • Combination provides an additional bank charter and a sophisticated national liquidity and treasury management business to diversify Raymond James’ deposit gathering capabilities and to provide additional internal FDIC -insured deposit capacity to Raymond James’ Private Client Group clients
  • TriState Capital has organically grown middle-market commercial loans at an 18 percent compound annual rate since 2017 and 15 percent over the last 12 months to $3.7 billion as of September 30, 2021
  • TriState Capital’s highly experienced lending and credit management teams, combined with its disciplined loan approval process and collateral monitoring system, has led to superb credit quality across the entire portfolio
  • Chartwell Investment Partners will maintain an independent brand and management and operate as a subsidiary of Carillon Tower Advisers with pro forma combined assets under management of approximately $80 billion. Chartwell will leverage Carillon Tower Advisers’ multi-boutique structure to increase scale, drive distribution, and realize operational and marketing synergies
  • TriState Capital’s long-standing commercial fund finance solutions for private fund managers provides an opportunity to expand relationships with Raymond James’ investment banking clients

Key Financial Metrics:

  • Projected to be accretive to diluted earnings per share in the first full year post closing (excluding acquisition-related expenses), with over 8 percent accretion in diluted earnings per share after the third year; accretion estimates increase meaningfully, by approximately 400 basis points, assuming share repurchases post-closing to offset shares issued as part of the transaction consideration
  • Primary driver of cost synergies is replacing a portion of TriState Capital Bank’s current and future higher-cost deposits with Raymond James’ lower-cost deposits from the Raymond James Bank Deposit Program

Raymond James is a leading diversified financial services company providing private client group, capital markets, asset management, banking and other services to individuals, corporations and municipalities. The firm serves more than 8,400 financial advisors managing approximately $1.2 trillion in client assets through a multiple affiliation model. Raymond James’ bank subsidiary, Raymond James Bank, has assets of $35 billion serving corporations and Private Client Group clients. The firm’s asset management subsidiary, Carillon Tower Advisers, manages retail and institutional fixed income and equity strategies of $69 billion.

TriState Capital Holding is a diversified financial services firm providing banking and asset management services to individuals, corporations and municipalities. Through a branchless bank model with over $12 billion in assets, TriState Capital is the nation’s leading provider of securities-based loans for clients of independent investment advisory firms, trust companies, broker-dealers, regional securities firms, family offices, insurance companies and other financial intermediaries that do not offer proprietary banking services. The firm’s banking franchise includes private banking and middle-market focused commercial lending with approximately $10 billion in loans. Additionally, the firm’s asset management franchise, Chartwell Investment Partners, manages assets of approximately $11 billion predominantly in equity and fixed income strategies.

Under the terms of the agreement, TriState Capital common stockholders will receive $6.00 cash and 0.25 Raymond James shares for each share of TriState Capital common stock, which represents per share consideration of $31.09 based on the closing price of Raymond James common stock on October 19, 2021. Raymond James has entered into an agreement with the sole holder of the TriState Capital Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock pursuant to which the Series C Convertible Preferred will be converted to common shares at the prescribed exchange ratio and cashed out at $30 per share. The TriState Capital Series A Non-Cumulative Perpetual Preferred Stock and Series B Non-Cumulative Perpetual Preferred Stock will remain outstanding and be converted into equivalent Preferred Stock of Raymond James.

The acquisition is subject to customary closing conditions, including regulatory approvals and approval by TriState Capital shareholders, and is expected to close in 2022.

Advisors to Raymond James are Raymond James & Associates as financial advisor and Sullivan & Cromwell LLP as legal counsel. Advisors to TriState Capital are Stephens Inc. as financial advisor and Mayer Brown LLP as legal counsel.

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