Swiss bank says it wants to focus it efforts on bigger, richer U.S. markets. Zurich-based UBS has agreed to sell up to 55 of its U.S. retail-brokerage branches to Stifel Nicolaus in a strategic pullback from smaller markets in which it has been losing market share.

The planned transaction "positions UBS to continue to gain market share in strategic markets which are key to our long-term growth," says Jamie Price, head of UBS Wealth Management Advisor Group.

The branches in question employ about 320 financial advisers with approximately $15 billion in assets under management. They are in 24 mainly midwestern and western states with a smattering of locations in Florida and on the coasts.

Winnowing

Right now UBS has 8,182 brokers in 406 branches around the U.S.

Because UBS bolstered it presence in the U.S. hinterland a few years ago by acquiring the retail-brokerage businesses Piper Jaffray and KeyCorp, it's tempting to view this sale as the start of a hasty pullback from the U.S. "flyover" zone. But UBS says that only 15% of the branches now on the block were previously Piper Jaffray or KeyCorp branches -- and that it remains committed to certain large and lucrative markets, like Minneapolis and Cleveland, in which it is a major player due, in large part, to those acquisitions.

"UBS has been gaining share in larger markets and losing share in smaller markets for some time," says UBS spokesman Kris Kagel. "As a result, we initiated consolidation efforts in some markets, and where this was not possible, ultimately reached the decision to sell these branch locations."

Adds Kagel: "This transaction is a step to help position us for further growth in [the high-net worth and ultra-high net worth] segments, improve overall productivity, and more effectively focus our resources to deliver a superior experience to clients in our core markets."

Middle market

St. Louis, Mo.-based Stifel Nicolaus has about six weeks to decide how many of the 55 branches and the number of brokers it actually wishes to acquire. Then, the agreement calls for Stifel Nicolaus to pay UBS an immediate cash payment of up to $27 million, make annual earn-out payments over two years following the deal's completion based the performance of UBS brokers who become Stifel Nicolaus brokers, and make "aggregate payments" of up to roughly $19 million "for net fixed assets and employee forgivable loans," according to a Stifel Nicolaus press release.

Stifel Nicolaus has also agreed to acquire other client related assets, and assume certain liabilities, associated with the branches acquired.

The UBS branches up for grabs make "a unique strategic fit" with Stifel Nicolaus, according to Ronald Kruszewski, chairman and CEO of Stifel Nicolaus' corporate parent Stifel Financial. "The addition of this talented group of professionals furthers our efforts to meet our goal of expanding across the country and further build upon Stifel's recent growth achieved through our successful acquisitions and integrations of the Legg Mason Capital Markets Group in 2005, Ryan Beck in 2007 and Butler Wick last year."

In 2008, the 55 branches UBS is selling brought in sales of about $116 million, including approximately $100 million in "compensable" revenue, according to Stifel Nicolaus.

UBS agreed to buy Minneapolis-based Piper Jaffray's brokerage business for $500 million in 2006. Going into the deal, Piper Jaffray had about 800 brokers in 90 offices in 22 states, most of them west of Mississippi. Less than a year later UBS acquired Cleveland-based KeyCorp's brokerage unit McDonald Investments, which had 340 brokers in 51 branch offices in the Midwest and West, for a total payout of as much as $280 million.

Stifel Nicolaus operates 203 offices in 36 states. -FWR

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