Stifel to Buy Part of B. Riley's Wealth Unit

B. Riley Financial Inc. agreed to sell a portion of its wealth-management business to Stifel Financial Corp. for as much as $35 million, the latest in a series of asset deals aimed at stabilizing the money-losing investment firm.

The accord covers 40 to 50 advisers managing about $3.5 billion to $4.5 billion as of Sept. 30, Los Angeles-based B. Riley said in a statement Friday.

The company counted about 400 registered financial advisers as of last December, with assets under management of about $25 billion.

Some of B. Riley's top brokers have defected as the firm's fortunes eroded, and U.S. authorities probed some of its business deals and disclosures. A spate of departures in recent weeks had already trimmed about 8% of B. Riley's brokerage force, without any compensation to the firm.

One of the largest exits involved dozens of brokers in Boca Raton, Florida, Bloomberg News reported, potentially taking as much as $1.4 billion in assets to Kestra Financial.

"The past year has proved disruptive to our wealth-management business, with competitors taking advantage of the noise surrounding our principal investments business," co-founder Bryant Riley said in the statement. "We decided to take a proactive approach for those who wanted a fresh start and found a well-respected partner in Stifel."

The deal is a pragmatic recognition by B. Riley that some of its best brokers are going to leave under the circumstances, so the firm might as well get something in return, according to a spokesman.

B. Riley shares advanced as much as 2.3% in New York trading Friday morning. They've tumbled 71% this year.

The deal's final price, ranging from $27 million to $35 million, will be based on the number of advisers who make the move to Stifel along with their customer accounts early next year, B. Riley said.

The transaction doesn't include B. Riley's roughly 190 independent advisers or its 90 tax professionals.

Stifel Chief Executive Officer Ron Kruszewski didn't immediately respond to a request for comment.

Financial Losses, Other Setbacks

Brokers and some clients have considered moving amid concern about B. Riley's financial losses and accounting setbacks, which include its failure so far to file second-quarter financial statements.

The company suspended its dividend in August to put a priority on cutting leverage, and recently renegotiated its key loan with terms that included paying down the balance and terminating a revolving credit line.

The firm's woes have also spurred a probe by the US Securities and Exchange Commission. Riley and the company have said they're cooperating and there's been no wrongdoing.

B. Riley has signed at least two other deals to raise cash, including divesting rights to its stable of consumer brands for $236 million.

The company also agreed to sell a majority stake in its Great American business to funds managed by Oaktree Capital Management LP. The transactions could help B. Riley bolster its balance sheet as it wrestles with a debt load that totaled about $2 billion at midyear.