On Jan. 17 RCS Capital Corp (RCAP) announced the acquisition of Cetera Financial Group to the tune of $1.5 billion, making RCS one of the country’s largest independent brokerages, with over $191 billion in managed assets.
Even before the acquisition, RCS Capital sported a strong profile, with a microscopic P/E of 4.89 and a projected doubling this year of EPS growth. Now with the acquisition, RCS is making clear that they are making their move into the big leagues of indie finance. Chairman Nicholas Schorsch said as much on the acquisition news, saying macro conditions were perfect to make the play for Cetera.
"We think this is the right time in the cycle," Schorsch said in reference to indications the economy is in recovery. “This combination gives us a great platform with massive synergies and the ability build a clearing business in the future or the ability to negotiate a better clearing deal… we are a newly minted investment bank with reach from Wall Street to Main Street.”
In an interview following the deal, Schorsch went on to compare his burgeoning company to household name Merill Lynch. Of course, Merrill Lynch’s story didn’t end well: the company was disgraced in the 2008 financial crisis before being scooped up by Bank of America (BAC) . The Merrill Lynch moniker is now as toxic as the assets that sank them, so much so that the entity might eventually be swallowed and the name discarded.
But if the economy is improving as much as Schorsch believes, then there is room for a new Merrill Lynch, one that could very well be filled by an upstart like RCS that hopefully has learned from its predecessor’s mistakes.
RCS spiked on the deal, gaining 9.66 percent by midday to hit an even $21 a share. RCS went public in June 2013, dropping off after a mediocre initial public offering. With the day’s stock pop, RCS has finally bested its IPO price of $20 a share.
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