Managers Near Pact to Buy 2 Brokerages From Hancock
Senior executives of Sutro & Co. and Tucker Anthony Inc., the two brokerage units of John Hancock Mutual Life Insurance Co., are near a pact to buy the firms from Hancock for about $180 million, people familiar with the talks said Wednesday.
The talks involve the combined purchase of both firms by a management-led investor group, and an announcement could come as early as this week, the sources said.
Both San Francisco-based Sutro and Boston-based Tucker Anthony are small but venerable players in securities brokerage. In California, Sutro has long been a familiar--if second-tier--provider of brokerage and investment banking services.
Sutro, founded in 1858, is the oldest member of the New York Stock Exchange west of the Mississippi River, and has carved a niche as a provider of financing for mid-size California companies. The firm has about 620 employees in 21 offices, most of which are in California and the West.
Tucker Anthony, itself 104 years old, has about 1,300 employees in 39 offices located largely in the Eastern United States. Like Sutro, it provides retail and institutional brokerage and underwrites corporate and municipal securities. Hancock bought Sutro in 1986 in good part to expand its brokerage services to the West.
But the firms’ small size and modest growth rates proved lackluster for giant Hancock, the sources said. The Boston-based insurer, with $51 billion in assets, is moving to shed the firms to focus on its core insurance lines, they said.
Hence, if the sale occurs, Hancock would become the latest in a string of large companies that bought brokerage firms, then struggled to profitably exploit those assets and eventually sold them off.
Another big insurer, Kemper Corp., spun off its brokerage business last year into a new firm called Everen Capital Corp. Previously, American Express Co. unloaded Shearson, and Sears, Roebuck & Co. divested Dean Witter Reynolds.
Hancock earlier this year had confirmed that it was looking to shed Sutro and Tucker Anthony (which it acquired in 1982), but it has never detailed why the firms were not meeting its expectations.
On Wednesday, Hancock spokesman Brian Carmichael again declined comment because “a deal has not been signed.” Sutro spokeswoman Emily Hoburg also had no comment.
Tucker Anthony and Sutro have combined capital of about $110 million, which doesn’t even place them among the 50 largest securities firms. Together they also have a modest $4.4 billion of assets under management.
Nonetheless, Sutro has a storied history. Started by two German brothers, Gustav and Charles Sutro, the firm weighed gold dust for miners and was the first brokerage house in the West.
Sutro helped finance the start of Central Light & Gas Co., which later became Pacific Gas & Electric Co.; the Omnibus Street Railroad, which developed into San Francisco’s cable cars, and the rail system that evolved into the Southern Pacific Railroad. Sutro was sold to Hancock in 1986.
Meanwhile, the sources said much of the financing for the proposed buyout is being arranged by Thomas H. Lee Co., a Boston investment firm that’s been carving an increasingly large profile as a corporate-buyout specialist.
Lee is best known for reaping profits of more than $800 million for its investors when it sold its control of Snapple Beverage Corp. to Quaker Oats Co. for $1.7 billion in 1994.
Lee also is part of an investor group that has agreed to buy the Orange, Calif.-based information services unit of TRW Inc. for $1.1 billion. Lee executives declined comment on the Hancock deal.
