Boosting its inorganic growth strategy through acquisitions,
Hilltop Holdings Inc.
) has offered to acquire
SWS Group Inc.
) for an amount worth $231 million. However, the deal awaits
approval from the acquiree or the target firm.
Hilltop already holds a 24% stake in SWS Group, after the
company invested $50 million in the latter in 2011 through a
five-year senior unsecured term loan. Additionally, SWS had
issued Hilltop a warrant to purchase 8,695,652 shares of SWS
common stock, with par value of 10 cents per share, exercisable
at a price of $5.75 per share.
Following the investment in SWS Group in 2011, Hilltop went on
an acquisition spree and purchased U.S.-based financial services
company PlainsCapital Corp. for $813.5 million at the end of
2012. Subsequent to this acquisition, Hilltop became a financial
bank holding company. Further in Sep 2013, Hilltop acquired
Texas-based First National Bank (FNB) from the Federal Deposit
Insurance Corporation (FDIC) for about $2.2 billion.
Hilltop has grown by leaps and bounds on the back of these
acquisitions, as reflected by a huge surge in shareholder equity,
assets, revenue and earnings.The deals have helped the company
diversify its operations from core property- casualty (P&C)
insurance to profitable banking operations, thereby substantially
adding stability and visibility to the operating leverage in
The complete acquisition of SWS Group also complements
Hilltop's strategy to expand its banking operations. Hence, the
company has offered a price of $7.00 per share for the remaining
76% stake of SWS Group, which equates to $231 million, 50% of
which is expected to be funded by cash and the remaining 50% by
While the announcement of the proposed deal preceded the
opening bell on Jan 10, shares of Hilltop hit a 52-week high of
$25.61, closing at $25.40, up 8.4% from the prior-trading
session. This banking and insurance company's shares have
escalated a whopping 80% since the beginning of 2013.
Friday's closing price represents a robust one-year return of
about 83.9% against a return of 25.2% clocked by the S&P 500
index. Average volume of shares traded over the last three months
stands at approximately 415.5K.
The encouraging momentum of this Zacks Rank #1 (Strong Buy)
stock is fuelled by improved operating growth coupled with a
strong competitive position. The estimated long-term earnings
growth is pegged at 10.0%, higher than the peer group average of
8.4%. On the other hand, shares of SWS Group, carrying a Zacks
Rank #3 (Hold), also shot up over 20% to $7.28 on Friday.
Some other well-ranked financial stocks that warrant a look
). Both these stocks carry the same Zacks Rank as Hilltop.
HILLTOP HLDGS (HTH): Free Stock Analysis
PARTNERRE LTD (PRE): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
SWS GROUP INC (SWS): Free Stock Analysis
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