Cetera Financial Group, the retail brokerage owned by Nicholas Schorsch's RCS Capital Corp., has half a dozen potential investors kicking its tires and will have a new owner or significant private equity investor by year-end.
That was the message from Cetera chief executive Larry Roth to 1,200 advisers on a conference call on Monday afternoon, according to sources with knowledge of the call.
Last month, Bloomberg News reported that Cetera's parent company, RCS Capital Corp., or RCAP, had put the brokerage network of 9,500 advisers up for sale for at least $700 million and had hired investment bank Lazard Ltd. to find potential suitors.
Mr. Schorsch's nontraded real estate trust empire has been under siege since a listed REIT he formerly controlled, American Realty Capital Properties Inc., now Vereit Inc., said last year that it had intentionally left uncorrected accounting misstatments over the first half of 2014.
Since then, RCAP's stock price has plummeted. After trading closed on Monday, RCAP shares were priced at 50 cents, a decline of 95.6% in the past 12 months. The company has $800 million in long-term debt, the result of Mr. Schorsch's buying binge of retail broker-dealers, including four Cetera-branded firms.
Mr. Roth's comments on Monday did not name specific firms looking to buy Cetera, said an adviser who was on the call as well as industry recruiters who had conversations with advisers who also listened in.
Mr. Roth's comments also came after the news Monday morning that
Apollo Global Management and AR Capital, Mr. Schorsch's real estate management company, called off an earlier announced transaction in which Apollo would have bought a majority stake in the company for $378 million.
(More:
How Nick Schorsch lost his mojo).
Apollo, however,
said it was moving forward with buying RCAP's wholesaling broker-dealers, including Realty Capital Securities, for $6 million in cash, considerably less than the $25 million it had agreed to pay earlier.
The adviser who listened in on the conference call, and who asked to remain anonymous, said some parties are reportedly interested in buying the firm outright while others are interested in investing in the company in exchange for an equity position.
“The goal is to entirely pay off the debt," he said. “Both types of deals are possibilities. What was clear was the objective to have Cetera and the broker-dealers be the sole and exclusive company.”
Matt Griffes, a spokesman for Cetera did not respond to a request to speak with Mr. Roth or to comment about the conference call. Andrew Backman, a spokesman for RCAP declined to comment beyond a company press release issued Monday morning.
One development that could smooth any deal for the firm is the transfer of the single B share of RCAP, which is the controlling share of the company, from a company controlled by Mr. Schorsch, RCAP Holdings, to the independent board of directors of RCAP.
In a press release on Monday, RCAP said that RCAP Holdings had granted the independent members of its board of directors “a proxy to vote the single outstanding share of the company's class B common stock on certain specified matters in support of a restructuring transaction approved by the board of directors.”
On the call, Mr. Roth stressed that replacement of capital and having the controlling B share in the hands of independent directors as most important, said the adviser. “The independent board members now have control” of RCAP, the adviser said.
