Why SWS Group Inc Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of SWS Group Inc (NYSE: SWS  ) soared 20% today after bank holding company Hilltop Holdings (NYSE: HTH  ) offered to acquire the financial services specialist for about $231 million.

So what: The cash-and-stock deal -- 50% cash and 50% Hilltop stock -- values SWS at $7 per share and represents a premium of 16% to yesterday's close. Hilltop is making the offer to acquire the roughly 76% of SWS that it doesn't already own, and judging by its own stock's 8% pop today, Mr. Market is pleased with the price management is paying to do it.

Now what: SWS' Board of Directors will now review the proposal, but Wall Street seems confident a deal will go through. "We believe that Hilltop's and SWS's businesses are highly complementary, and that the proposed transaction is a compelling opportunity for SWS's stockholders, as well as its employees and customers," said Hilltop Chairman Gerald Ford. "The transaction represents a premium to market for SWS stockholders, while also enabling stockholders to participate in the continued growth of the combined enterprise."

So while SWS' upside is likely limited at this point, Hilltop's newly bolstered scale might be worth looking into. 

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