Rodman & Renshaw CEO says market reaction to acquisition proposal for Cowen affirms rationale

By Jennifer Lanning Drey

Portland, Ore., Dec. 15 - Rodman & Renshaw Capital Group, Inc.'s chief executive officer said Monday that the company is heartened by the market reaction thus far to its proposal to acquire Cowen Group Inc. and believes it affirms the rationale behind the transaction.

"This proposal offers Cowen's stockholders two advantages: the ability to realize significant cash in the transaction now and the ability to participate with Rodman's current stockholders in the upside potential of the combined firm - potential that we believe far greater than of Cowen as presently constituted and managed," Michael Lacovara, Rodman's CEO, said Monday during an investor presentation held to discuss the proposed transaction.

As previously reported, on Dec. 8 Cowen rejected Rodman & Renshaw's unsolicited acquisition proposal to acquire Cowen for $7 per share.

"Cowen's revenue has been dominated by low-margin lines of business, especially in equity sales and trading. That is a large business at Cowen, but Cowen's performance in that business, at least as presently managed, is at best a marginally profitable business," Lacovara said.

The CEO added that Rodman believes Cowen's sales and trading business includes valuable assets that would be core to the success of the combined franchise but sees areas for improvement in the business.

Revenue improvements

A large chunk of the improved revenue at the combined company would come from increased private-investment-in-public-equity transactions, Lacovara said during the presentation.

"Given our depth and reach in this key product, and this key driver of profitability, and given its durable importance as a life science finance product, we strongly believe that by combining the two businesses and deploying Rodman's leadership in PIPE transactions across Cowen's client base, we can drive added revenue," he said.

Other benefits of the combined company include a broader research team and an expanded geographic footprint for Rodman, which would leverage Cowen's infrastructure in Asia and Europe, where Rodman has substantial relationships but little physical presence or infrastructure, Lacovara said.

Conservative estimates

Rodman estimates the transaction would result in cost savings of about $36.5 million in 2009 and $38.4 million in 2010.

The contribution from revenue enhancements is expected to generate $18.0 million of pro forma pre-tax income for 2009 with 12% growth thereafter.

Lacovara said all assumptions made regarding the potential transaction are conservative because Cowen has not conceded Rodman's requests related to performing due diligence.

Rodman intends to continue its outreach to stockholders through the holidays and beyond, Lacovara said.

Rodman & Renshaw is a holding company based in New York. Its subsidiaries include investment bank Rodman & Renshaw, LLC, Rodman Principal Investments, LLC and Miller Mathis & Co., LLC.

Cowen is a New York-based provider of investment banking, sales and trading and equity research services.

Mentioned in this article:

Cowen Group Inc. Nasdaq: COWN

Rodman & Renshaw Capital Group, Inc. Nasdaq: RODM

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