Piper Jaffray to Buy Energy-Investment Firm Simmons & Co.
November 17 2015 - 6:40PM
Dow Jones News
Investment banking firm Piper Jaffray Cos. said Tuesday that it
has agreed to acquire energy-focused investment bank Simmons &
Co. International for about $139 million in cash and stock, a move
to expand its presence to the beaten-down oil-and-gas sector.
Piper Jaffray will pay $91 million in cash and $48 million in
restricted stock, in addition to $21 million in cash and stock for
retention purposes.
Based in Houston, Simmons offers merger-and-acquisition advisory
services as well as trade execution and investment research. It was
founded in 1974 by Matthew Simmons to advise oil-field services
companies. Mr. Simmons, who died in 2010, was a famous proponent of
"peak oil," the theory that the world is running out of oil.
Over the years Simmons branched out to offer stock research and
advise a broader range of energy companies. Its analysts' daily
research note is widely read on Wall Street and in the oil
patch.
In an interview, Piper Jaffray Chief Executive Andrew Duff and
Simmons executives Fred Charlton and Michael Frazier said the firms
began talking about a combination in 2011 as employee-owned Simmons
sought to chart a course after its founder's death. Piper,
meanwhile, has long eyed the energy business, they said.
Though the collapse in commodity prices has dented Simmons
revenue somewhat, executives said the firm's business advising
pipeline and refining companies remains strong. Meanwhile, they
said, new mandates have come from oil-and-gas producers looking to
sell assets to raise cash to replace lost bank financing and
oil-field services clients that are exploring cost-saving
combinations.
"I don't think there's really a connection between what the
price of oil is and how we get paid," Mr. Frazier said. "We'll
always be subject to fund flows of hedge funds and mutual funds and
money managers…but we're always going to have our market
share."
Simmons reported revenue of $96 million in its most recent
business year, which ended in June. Piper executives said Simmons's
annual revenue has exceeded $120 million in good years, and they
expect it to be around $85 million in the current fiscal year.
Piper Jaffray reported $684.1 million in total revenue in 2014,
with $369.8 million coming from investment banking.
The firm expects to complete the Simmons transaction in the
first quarter of 2016 and anticipates that the deal will add to its
earnings during the first full year after the deal closes. Piper
Jaffray said it intends to offset dilution from shares issued in
the transaction with future share repurchases.
The Simmons executives said that each of its 25 managing
directors, who own a bulk of the closely held firm's stock, have
signed on to join Piper Jaffray. The firm's entire research
department is also on board with the move and will continue to
publish research under the Simmons brand, they said.
Piper shares slipped 3.7% on Tuesday to close at $34.53 and are
down 40.6% this year.
Write to Ryan Dezember at ryan.dezember@wsj.com and Lisa
Beilfuss at lisa.beilfuss@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 17, 2015 18:25 ET (23:25 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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