Filed by SWS Group, Inc.
Pursuant to Rule 425 of the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: SWS Group, Inc.
(Commission File No.: 000-19483)
The following electronic communication was sent to all employees of SWS Group, Inc. and its subsidiaries on April 1, 2014:
Dear SWS employees,
I am writing to share some important news. This morning, we announced that we have entered into a definitive merger agreement with Hilltop Holdings, one of SWS Group’s two largest stockholders. Under the terms of the agreement, SWS Group shareholders will receive per share consideration of 0.2496 shares of Hilltop Holdings common stock and $1.94 of cash, equating to $7.88 per share based on Hilltop’s closing price on March 31, 2014. The complete press release is attached.
As you may recall, on January 10th, 2014, Hilltop announced its interest in merging with SWS Group and publicly proposed a transaction. Since that time, a Special Committee of the SWS Group Board of Directors has been carefully reviewing a full range of strategic and financial alternatives for SWS Group and unanimously concluded the transaction with Hilltop is in the best interests of our stockholders.
As a publicly-traded financial holding company based in Dallas, Hilltop has approximately $9 billion in assets and approximately 4,550 employees across its four business segments – banking, mortgage origination, financial advisory and insurance. Hilltop’s strategy has been to build a premier Texas-based bank and prominent diversified financial services company, and SWS’s businesses align well with that goal. For example, Hilltop plans to merge Southwest Securities, Inc., with First Southwest, to create the leading Texas-based broker/dealer with significant strengths in municipal finance and clearing. Additionally, Hilltop expects to combine Southwest Securities, FSB, with PlainsCapital Bank, to create the fourth largest Texas-based bank by deposits.
Hilltop’s and SWS Group’s businesses are highly complementary, and we believe the proposed transaction is a compelling opportunity for our stockholders to participate in the continued growth of the combined enterprise. Furthermore, Hilltop’s strong reputation and proven track record of successfully integrating acquisitions gives us confidence that this combination will lead to additional opportunities to accelerate operating initiatives already under way.
I want to recognize all of your hard work in building SWS Group and getting us to this point. This transaction reflects an important next step in SWS Group’s development, and we believe SWS Group will benefit from being part of a larger, more diversified organization that is strongly capitalized and better positioned to compete in the marketplace.
As with any transaction of this kind, there are steps that still need to be taken prior to closing, which we expect to be completed prior to the end of 2014. Thereafter, SWS Group will become part of Hilltop and SWS stock will no longer be traded on the New York Stock Exchange. Additionally, completion of this transaction is contingent upon the satisfaction of certain conditions, including regulatory and SWS shareholder approvals. We will strive to keep you informed as events progress.
While many of the key decisions about how we will combine our operations have not yet been made, we are committed to working together to facilitate a smooth transition. We will form a transition team made up of representatives of both companies to provide recommendations on how best to organize the combined company and our operations.
In the meantime, until the transaction closes, we remain separate companies and today’s announcement should have no effect on our operations – it remains business as usual. We all need to remain focused on achieving our goals and serving our clients with the same passion and dedication that they have come to expect from us.
It is likely that this transaction will generate interest from the media and other third parties, and it is important that we speak with one voice. Consistent with our existing policy, please forward all media calls to Ben Brooks, Corporate Communications, at 214-859-6351, and investor calls to Mike Edge, Chief Financial Officer, at 214-859-9343.
As always, I thank you for your continued hard work and dedication to serving our clients.
Sincerely,
Jim Ross
Important Information For Investors And Shareholders
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Hilltop Holdings, Inc. (“Hilltop”) will file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 containing a proxy statement/prospectus of SWS Group, Inc. (“SWS”) and Hilltop, and SWS and Hilltop will each file other documents with respect to the proposed transaction and a definitive proxy statement/prospectus will be mailed to shareholders of SWS. Investors and security holders of SWS are urged to read the proxy statement/prospectus and other documents that will be filed with the SEC carefully and in their entirety when they become available because they will contain important information. Investors and security holders of SWS will be able to obtain free copies of the registration statement and the proxy statement/prospectus (when available) and other documents filed with the SEC by SWS or Hilltop through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by SWS will be available free of charge on SWS’s internet website at www.swst.com or by contacting SWS’s Investor Relations Department at (214) 859-1800. Copies of the documents filed with the SEC by Hilltop will be available free of charge on Hilltop’s internet website at www.hilltop-holdings.com or by contacting Hilltop’s Investor Relations Department at 214-252-4029.
SWS, Hilltop, their respective directors and certain of their executive officers and other members of management and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of SWS is set forth in its Annual Report on Form 10-K for the year ended June 30, 2013, which was filed with the SEC on September 6, 2013, its proxy statement for its 2013 annual meeting of shareholders, which was filed with the SEC on October 3, 2013, and its Current Reports on Form 8-K, which were filed with the SEC on September 17, 2013 and October 1, 2013. Information about the directors and executive officers of Hilltop is set forth in its most recent proxy statement, which was filed with the SEC on April 30, 2013. Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
Cautionary Statement Regarding Forward-Looking Statements
From time to time we make statements (including some contained in this report) that predict or forecast future events, depend on future events for their accuracy, or otherwise contain “forward-looking” information and constitute “forward-looking statements” within the meaning of applicable U.S. securities laws. Such statements are generally identifiable by terminology such as “plans,” “expects,” “estimates,” “budgets,” “intends,” “anticipates,” “believes,” “projects,” “indicates,” “targets,” “objective,” “could,” “should,” “may” or other similar words. By their very nature, forward-looking statements require us to make assumptions that may not materialize or that may not be accurate. Readers should not place undue reliance on forward-looking statements and should recognize that such statements are predictions of future results, which may not occur as anticipated. Actual results may differ materially as a result of various factors, some of which are outside of our control, including:
| | • | | failure to obtain the approval of shareholders of SWS in connection with the proposed transaction; |
| | • | | the failure to consummate or delay in consummating the proposed transaction for other reasons; |
| | • | | the timing to consummate the proposed transaction; |
| | • | | the risk that a condition to closing of the proposed transaction may not be satisfied; |
| | • | | the risk that a regulatory approval that may be required for the proposed transaction is delayed, is not obtained, or is obtained subject to conditions that are not anticipated; |
| | • | | Hilltop’s ability to achieve the synergies and value creation contemplated by the proposed transaction; |
| | • | | Hilltop’s ability to promptly and effectively integrate its and SWS’s businesses; |
| | • | | the diversion of management time on transaction-related issues; |
| | • | | the interest rate environment; |
| | • | | the volume of trading in securities; |
| | • | | the liquidity in capital markets; |
| | • | | the volatility and general level of securities prices and interest rates; |
| | • | | the ability to meet regulatory capital requirements administered by federal agencies; |
| | • | | the level of customer margin loan activity and the size of customer account balances; |
| | • | | the demand for real estate in Texas, New Mexico and the national market; |
| | • | | the credit-worthiness of our correspondents, trading counterparties and of our banking and margin customers; |
| | • | | the demand for investment banking services; |
| | • | | general economic conditions, especially in Texas and New Mexico, and investor sentiment and confidence; |
| | • | | the value of collateral securing the loans we hold; |
| | • | | competitive conditions in each of our business segments; |
| | • | | changes in accounting, tax and regulatory compliance requirements; |
| | • | | changes in federal, state and local tax rates; |
| | • | | the ability to attract and retain key personnel; |
| | • | | the availability of borrowings under credit lines, credit agreements and credit facilities; |
| | • | | the potential misconduct or errors by our employees or by entities with whom we conduct business; |
| | • | | the ability of borrowers to meet their contractual obligations and the adequacy of our allowance for loan losses; and the potential for litigation and other regulatory liability. |
Our future operating results also depend on our operating expenses, which are subject to fluctuation due to:
| | • | | variations in the level of compensation expense incurred as a result of changes in the number of total employees, competitive factors or other market variables; |
| | • | | variations in expenses and capital costs, including depreciation, amortization and other non-cash charges incurred to maintain our infrastructure; and |
| | • | | unanticipated costs which may be incurred from time to time in connection with litigation, regulation and compliance, loan analyses and modifications or other contingencies. |
Other factors, risks and uncertainties that could cause actual conditions, events or results to differ materially from our expectations discussed in this report include those factors described in SWS’s Annual Report on Form 10-K for the year ended June 30, 2013, under the heading “Risk Factors,” and our other reports filed with and available from the SEC. Our forward-looking statements are based on current beliefs, assumptions and expectations. No assurances can be given that any of the events anticipated by these forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our actual results, levels of activity, performance, or achievements. All forward-looking statements speak only as of the date on which they are made and, except as required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.
