Ladenburg Thalmann Financial Services Inc.’s former chairman and its largest shareholder, Phillip Frost, has filed a lawsuit against the firm following its proposed merger with Advisor Group, which was announced last month. The story was first reported by Investment News.
Advisor Group, one of the nation’s largest networks of independent wealth management firms, and Ladenburg Thalmann Financial Services Inc. (NYSE: LTS), a publicly traded financial services company, signed a definitive merger agreement last month to join the two companies. The transaction is expected to close in the first half of 2020.
According to the company’s latest quarterly financial filing, December 20th, Frost and Frost Nevada Investments Trust filed a lawsuit against Ladenburg Thalmann and its board members claiming that the board’s “determination to enter into the merger agreement disregards obligations owed to them as holders of certain notes issued by the company.”
The complaint seeks monetary damages, rescission of the transaction in which Frost sold a substantial portion of shares of common stock to the company, and an injunction against the merger.
Also, in December, three shareholders filed individual complaints against Ladenburg and its board in the United States District Court for the Southern District of New York, while two other shareholders filed class action lawsuits against the company, the board, Advisor Group and the merger subsidiary in the United States District Court for the District of Delaware and the United States District Court for the Eastern District of New York.
All five complaints allege that Ladenburg and the individual defendants violated federal securities laws by disseminating a preliminary proxy statement that included allegedly material misstatements or omissions about the merger.
According to the filing, the complaints allege that “the preliminary proxy statement omits or misrepresents material information concerning management projections, the valuation analyses that support the fairness opinion provided by Jefferies, the sales process, and potential conflicts of interest faced by the members of the board and the executive officers of the company.”
Each complaint seeks an order preliminarily and permanently enjoining the merger until the allegedly omitted information is disclosed, a rescission of the merger or an award of damages in the event the merger is consummated, and an award of plaintiff’s attorneys’ fees and costs.
Ladenburg Thalmann believes the lawsuits are without merit and intends to “defend vigorously” against the allegations.
As previously reported, Ladenburg has agreed to be acquired by Advisor Group through a cash merger, and each outstanding share of Ladenburg’s common stock will be converted into a cash payment of $3.50 per share. The combined company will have nine broker-dealers, with nearly 11,500 financial advisors and more than $450 billion in client assets.
The total enterprise value of the transaction is approximately $1.3 billion, taking into account Ladenburg’s common stock, preferred stock and outstanding debt. The definitive merger agreement and the transactions were unanimously approved by Ladenburg’s board.
Following the merger, Ladenburg’s firms will not be merged with Advisor Group’s firms and will continue to operate under a multi-brand network model of firms.
Advisor Group, Inc. is one of the nation’s largest networks of independent financial advisors serving more than 7,000 advisors and overseeing $271 billion in client assets. Its network of firms consists of FSC Securities Corporation, Royal Alliance Associates, SagePoint Financial and Woodbury Financial. Ladenburg’s independent advisory and brokerage firms include Securities America, Triad Advisors, Investacorp, KMS Financial Services and Securities Service Network (SSN).