Alesco Financial Inc.’s Proposed Merger with Cohen & Company Investor Presentation February 23, 2009 INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 CONTAINING THE PROXY STATEMENT/PROSPECTUS CAREFULLY AND IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION BETWEEN ALESCO FINANCIAL INC. AND COHEN BROTHERS, LLC. INVESTORS WILL BE ABLE TO OBTAIN THE PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT INFORMATION FILED BY ALESCO FINANCIAL INC. WITH THE SECURITIES AND EXCHANGE COMMISSION FREE OF CHARGE AT THE SEC'S WEBSITE AT WWW.SEC.GOV OR FROM ALESCO FINANCIAL INC., ATTN: INVESTOR RELATIONS, 2929 ARCH STREET, 17TH FLOOR, PHILADELP HIA, PENNSYLVANIA 19104. Exhibit 99.2 |
2 Important General Information Information set forth in this release contains forward-looking statements, which involve a number of risks and uncertainties. AFN cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained or implied in the forward-looking information. Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction involving AFN and Cohen & Company, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: factors that affect the timing or ability to complete the transactions contemplated herein; the ability of both companies to satisfy all necessary closing conditions, including obtaining a financing commitment; the risk that the business will not be integrated successfully; the risk that cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with lenders, other counterparties, or employees; competition and its effects on pricing, spending, third-party relationships and revenues; the failure of the companies to successfully execute their business plans, gain access to additional financing and the cost of capital. Additional factors that may affect future results are contained in AFN’s filings with the SEC, which are available at the SEC’s website www.sec.gov. |
3 Additional Information About Merger and Where to Find it In connection with the proposed merger, AFN will file with the SEC a Registration Statement on Form S-4 which will include proxy statements of AFN and Cohen & Company and a prospectus of AFN. STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY AND IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The definitive proxy statement will be mailed to AFN's stockholders. In addition, stockholders will be able to obtain the proxy statement/prospectus and all other relevant documents filed by AFN with the SEC free of charge at the SEC's website www.sec.gov or from Alesco Financial Inc., Attn: Investor Relations, 2929 Arch Street, 17th Floor, Philadelphia, PA 19104. Participants in the Solicitation AFN’s and Cohen & Company’s directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of AFN in favor of the proposed merger. Information about the directors and executive officers of AFN and their ownership of AFN stock is set forth in AFN’s proxy statement filed with the SEC on April 29, 2008. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement/prospectus for the proposed merger when it becomes available. Stockholders may obtain these documents from the SEC or AFN using the contact information above. |
4 Table of Contents I. Transaction Overview …………………………………….. 5 II. Strategic Rationale ………………………………………... 8 III. Terms & Conditions of Merger …………………………… 11 IV. Pro Forma Combined Company …………………………. 13 |
I. Transaction Overview |
6 Proposed Transaction Transaction On February 20, 2009, Alesco Financial Inc. (“AFN”) entered into a merger agreement with Cohen & Company (“Cohen”); Cohen is to merge with a subsidiary of AFN Combined company to be renamed; will be publicly traded; expect to move listing to NYSE Alternext (formerly AMEX) Merger agreement results in AFN shareholders owning 38.5% and Cohen owning 61.5% of the combined company, assuming full conversion of Cohen interests into AFN shares Holders of common stock of AFN will continue to hold their shares of AFN All stock transaction following 1 for 10 reverse split of AFN shares Combined company expected to operate as a C-Corp for tax purposes Valuation and Consideration AFN: Approximately 6.0 million shares; following 1 for 10 reverse split of AFN shares Cohen: Approximately 9.6 million shares; assuming full conversion of Cohen interests into AFN shares Closing 2 Half of 2009 Shareholder Approval Approval of the transaction by AFN’s shareholders; requires a quorum and the affirmative vote of a majority of those voting Proposed Transaction nd |
7 Proposed Corporate Structure AFN (i.e., the public company) C&C LLC (i.e., the operating company) Shareholders Daniel Cohen and other individuals (2) C&C Entities (3) Existing AFN Shareholders Former Cohen Members (1) 61.7% 38.3% 62.4% 100% 37.6% AFN Entities 100% Proposed Corporate Structure (1) Assumes certain Cohen members in addition to Daniel Cohen do not convert their shares concurrent with closing. For tax purposes, some may opt to remain owners at the Cohen level. (2) In the merger, Mr. Cohen will be issued Series A preferred stock which has no economic rights, but will entitle Mr. Cohen to elect one-third of the members of AFN’s board of directors. In 2010, Mr. Cohen may convert the Series A preferred stock into Series B preferred stock of AFN which will have no economic right, but will entitle Mr. Cohen to vote together with the holders of AFN’s common stock on all matters presented to the common stockholders and to exercise approximately 31.5% of the total voting power on such matters. (3) Cohen’s business (i.e., broker-dealer, asset management, etc.) will be conducted through its subsidiaries at this level. |
II. Strategic Rationale |
9 Compelling Strategic Rationale Internalizes Management Eliminates ongoing related party management fees without incurring any termination fee Aligns interests of management with shareholders Management Rationalization Move to a single management team for combined company Enhances ability to attract and retain talented people Operating Strategy Combined operations provides enhanced financial resilience, synergies and economies of scale to better manage through current market conditions Transaction is expected to be accretive to AFN shareholders since AFN’s business model will shift from a capital investment company to an operating company with various types of revenue streams and positive cash flow from operations Greater capital resources to pursue opportunistic initiatives in a distressed market, which may include potential acquisitions of other asset management and investment firms. Combination creates a platform specializing in credit related fixed income trading and management and a combined company with greater capital resources to pursue opportunistic initiatives in a distressed market, which may include potential acquisitions of other asset management and investment firms Compelling Strategic Rationale |
10 Strategic Fit Specialty finance company Flexible tax-advantaged structure with ability to employ leverage Externally managed by Cohen Investment firm specializing in credit related fixed income investments Fee-based business model with growth potential Expanding broker dealer platform Manages a variety of investment vehicles Revenue Driven by Investment Income Revenue Driven by Third Party Fee Streams Potential capital appreciation through enhanced growth Comprehensive fixed income broker dealer and asset management platform Scalable business model Diversification of revenue streams Efficient operating structure Appeals to a broader range of investors Growth and Revenue Diversification AFN Cohen Strategic Fit |
III. Terms & Conditions of Merger |
12 Terms & Conditions of Merger Agreement Board of Directors Seven current independent directors of AFN, plus Daniel Cohen and two additional individuals designated by Cohen & Company Officers Daniel Cohen will be Chairman and Chief Executive Officer Christopher Ricciardi will be President Joseph Pooler will be Chief Financial Officer AFN Stock Prior to the merger, AFN will effectuate a one-for-ten reverse stock split Cash will be received in lieu of fractional shares in connection with the reverse stock split Go-Shop Period 40 day period following date of merger agreement AFN has the right to initiate, solicit and encourage takeover proposals Proxy / Prospectus As soon as practical after the signing of the merger agreement, AFN will file the proxy statement/prospectus with the SEC in connection with the approval of the transaction and the registration of company shares in the combination Drop Dead Date Merger must close by September 30, 2009 Break-Up Fee $1.0 million during the “go shop” period; then $1.0 million plus other party’s fees and expenses not to exceed $1.0 million Terms & Conditions of Merger Agreement |
IV. Pro Forma Combined Company |
14 Company Snapshots AFN has no employees; Cohen is AFN’s external manager Cohen provides substantial, highly scalable infrastructure, including investment, accounting, risk management, legal, compliance, and operations functions for AFN Trading activities, new issue revenue, base asset management fees, incentive asset management fees, and gains and losses on seed capital investments and equity method affiliates Net investment income from subordinated debt financings, leveraged loans made to small and mid-sized companies, and mortgage loans, other real estate-related senior and subordinated debt securities and RMBS Revenue Streams 127 employees (as of 12-31-08) Does not have any employees; pursuant to the management agreement with its external manager, Cohen, all executive officers are employees of Cohen Number of Employees Philadelphia, New York, Chicago, Washington DC, San Francisco, Paris, London, Tokyo Philadelphia Locations $76.4 million $71.4 million (Net Investment Income) 1Q-3Q08 Net Revenue $22.6 billion (as of 12-31-08) Investment portfolio AUM Privately held company Publicly traded REIT (NYSE:AFN) Operating Structure Investment firm specializing in credit related fixed income investments with three segments: capital markets, asset management, and principal investing Specialty finance company that invests in sub debt, leveraged loans, mortgage loans and other real estate related securities Description Cohen AFN Company Snapshots |
15 Business Plan Pursue asset management and investment firm roll-up opportunities Continue to build existing alternative investment funds (Brigadier and Deep Value I) and pursue launch of new funds Expansion of broker-dealer platform in existing products: Investment grade corps, MBS, ABS, capital securities, structured credit products Expansion of broker-dealer platform in new products: European ABS / structured credit products, whole loan trading, leverage finance, private placement corps / ABS Continue to evaluate incremental “bolt-on” business opportunities Finalize and execute AFN/Cohen consolidation Rationalize and integrate operating platforms Continue to build broker-dealer platform Continue to build existing alternative investment funds (Brigadier and Deep Value I) We believe the combined company will be well positioned to take advantage of alternatives in the corporate / asset credit management arena upon market recovery Pursue best in class model for fixed income broker-dealer in new environment 1 2 3 Near-Term Medium-Term Long-Term 0–6 months 6–24 months 24+ months |
16 Company Overview Employs 127 employees with extensive financial services and real estate industry experience with offices in Philadelphia, New York, Chicago, Washington DC, San Francisco, Paris, London, and Tokyo Managed in three operating segments: We believe the new company will be a leading global investment firm specializing in credit related fixed income investments with approximately $23 billion in assets under management Principal Investing The Capital Markets Division will include seven traders and 25 salespeople based in New York, Chicago, London, San Francisco and Washington, DC Will trade a wide range of credit-based fixed income securities including high grade corporate bonds, asset-backed securities, collateralized loan obligations, mortgage- backed securities, trust preferred securities, whole loans, and other structured finance instruments. Will focus on trading of credit-based fixed income securities in which the Company has a historically deep level of expertise, and which represents a market that is thinly served by larger firms; will also selectively commit capital to enhance client trading activities. New Company Asset Management Will seed the investment vehicles that we sponsor with proprietary capital: Alternative Investment Funds: Brigadier Hedge Fund $5 million Deep Value Fund $15 million Permanent Capital Vehicles $1 million Will hold and manage AFN’s historical investment portfolio Will be a leading credit fixed income investment manager with a range of investment vehicles organized along asset classes, including alternative investment funds, permanent capital vehicles, and structured credit vehicles. Alternative Investment Funds: Brigadier Hedge Fund $192 million Deep Value Fund $112 million Permanent Capital Vehicles $335 million CDOs: Corporate Loans (1) $0.9 billion Trust Preferred Securities (23) $10.8 billion Asset-Backed Securities (16) $10.2 billion TOTAL AUM $22.6 billion Capital Markets (Broker-Dealer) Company Overview |
17 Competitive Strengths Management Arrangements Generate Recurring Fee Income – our base of relatively stable recurring fees will allow us to take advantage of market opportunities and grow our business. Product Innovation and Diversity – we will successfully leverage our experience into new products across a range of sectors to maximize portfolio diversification, and effectively transitioned our asset management teams toward investment funds while building out our capital markets platform. Client Relationships – we will maintain long-standing relationships with institutional investors. Alignment with Our Investors – we will invest capital in each of our investment vehicles. Comprehensive Platform – we will have the capabilities and infrastructure to originate, manage, structure, and trade credit related fixed income investments Proprietary Operating Systems – our proprietary operations software will be designed with inherent flexibility to respond in real-time to changing client needs and to satisfy capacity for existing and new investment products and strategies. Extensive Risk Management Expertise – we will employ sophisticated qualitative and quantitative institutional risk management systems to monitor and manage our exposure across business lines. Efficient and Scalable Operations – our existing infrastructure will allow us to easily and quickly expand into new credit-based asset classes without incurring significant additional costs. The new company will be positioned to take advantage of Cohen & Company’s competitive strengths to seek to grow its business and deliver superior returns to investors. |
18 Growth Strategy The new company expects to achieve its objectives through the following growth strategies Enhance Capital Markets Capabilities – continue to build-out our sales and trading platform and increase production in existing and new products, as well as expand geographically and through our client relationships Maintain Solid Performance – align our economic interests with those of our investors and deliver strong investment performance by devoting time and resources to effectively manage our investment vehicles Opportunistically Pursue Acquisitions – continue to pursue revenue and earnings growth through a management contract roll-up strategy as turmoil in the industry continues unabated and many of our competitors in the asset management space may be considering selling assets or management contracts in order to raise capital Capitalize on Reputation and Management Expertise – continue to draw upon the expertise of our professionals in each of our asset classes to create a comprehensive management platform, as well as using the strength of our reputation to attract talent and outside capital |