Stifel Financial Corp. agreed to buy Sterne Agee Group Inc. in a $150 million cash-and-stock deal merging two of the biggest U.S. brokerages outside of New York.

Stifel will pay at least $73 million in stock, depending on shareholder elections, it said Monday in a statement. The cash payment would be $66 million to $77 million, it said.

As part of the deal, Stifel and Sterne Agee agreed to sell the FBC Mortgage business back to its founders, according to the statement. Stifel also pledged to let Sterne Agee’s institutional equity and investment-banking business operate on a stand-alone basis -- finding a partner for it or potentially spinning it off.

Stifel Chief Executive Officer Ron Kruszewski has acquired firms including KBW Inc. and Thomas Weisel Partners Group Inc. since the financial crisis, as shrinking margins and difficulty adjusting to new technology and regulations prompted broker- dealers to combine or close.

Sterne Agee calls itself one of the oldest and largest closely held financial-services firms and traces its roots to a company founded in 1901 by a mayor of Birmingham, Alabama. It’s agreeing to give up independence after more than doubling its credit trading and sales team in less than four years.

Fixed-Income Expansion

The “fixed-income platform is highly complementary to our existing products and services, and together will catapult this business to a new level,” Kruszewski said Monday. While larger Wall Street banks are pulling back amid a slump in that business, the market isn’t going away, and there are still opportunities, he said.

“That’s when we invest, and that’s when we add good capabilities, and that’s when we gain market share,” he said. “Could we be wrong? Yes, we can be wrong, but I’d rather be wrong at what is viewed as a trough than be wrong at what is proven to be a peak.”

In May, Sterne Agee ousted CEO James Holbrook Jr. and his son William, who served as the firm’s chief operating officer. It named Eric Needleman, the head of fixed-income trading, as chairman of the firm and chief executive of its broker-dealer.

Both Holbrooks came under investigation by the U.S. Treasury and Justice Department over whether they misused company assets, a person with knowledge of the matter said in June, and Sterne Agee sued its former CEO in December.

“It’s a lot to do about nothing, and the allegations are grossly overstated,” Bruce Gordon, an attorney representing the Holbrooks, said in a phone interview in June.

Turmoil at companies and across the market creates opportunities for acquisitions, Kruszewski told investors at a conference in September.

“We go in and provide stability, provide operational stability and a good culture,” he said. “We stabilize situations.”

--With assistance from Noah Buhayar in Seattle.

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