RCS Capital is getting out of the wholesale business amid leadership changes. The parent of Cetera Financial Group announced Thursday it would sell its wholesale distribution unit, and some related activities, to Apollo Global Management for $25 million in cash.
Under the deal, which was announced during Thursday’s earnings call, the former wholesale division will become part of the newly formed AR Global Investments, which will also include asset management firm AR Capital, or ARC. Apollo is set to pay $378 million upfront, plus future payments contingent on performance, for a 60 percent of AR Global Investments.
RCS Capital will retain the brokerage business operating as Cetera Financial Group, the investment banking and capital markets group and its investment management unit Hatteras Funds.
Separating the wholesale and brokerage business will allow RCS Capital to become a “more simplified and refocused company,” CEO Michael Weil said Thursday. It also was announced Thursday that Weil and CFO Brian D. Jones will be stepping down. RCS Capital has already initiated a search for a new CEO and CFO and Weil and Jones will remain in place until their successors can be found.
In addition to the sale, RCS Capital noted that Cetera will enter into a strategic partnership with Apollo to offer alternative, Apollo-sponsored investment products through the brokerage’s network of independent financial advisors.
Apollo and affiliates of Luxor Capital Group also have agreed to invest $37.5 million ($25 million from Apollo and $12.5 million from Luxor) in RCS Capital through newly issued preferred stock. In conjunction with its investment, Apollo will appoint two members to the RCS Capital Board of Directors, including Marc Rowan, co-founder of Apollo, and Anthony Civale, lead partner & chief operating officer of Apollo Credit.
"We look forward to a long and fruitful partnership with Apollo," Larry Roth, CEO of Cetera, said Thursday.
Weil noted that the acquisition and partnership with Apollo was led by a committee of independent directors and unanimously approved by RCS Capital’s board of directors. The sale is subject to regulatory approvals and expected to close in 2015.
Over the last year and a half, under the leadership of Nicholas Schorsch, RCS Capital, Cetera’s parent, has been patching together a network of some 9,500 advisors across 11 broker/dealers. Schorsch stepped down from his role as executive chairman in January.