What happened

Shares of Ladenburg Thalmann Financial Services (NYSEMKT:LTS) jumped more than 20% on Tuesday after the brokerage and advisory company agreed to a merger.

So what

Wealth management firm Advisor Group is acquiring Ladenburg for $3.50 per share in cash, which represents an approximately 25% premium to Ladenburg's closing price on Monday. The deal values Ladenburg at an enterprise value of $1.3 billion, which factors in the company's common stock, preferred stock, and debt.

"This is a transaction that maximizes value for our shareholders, while positioning our financial advisors for continued growth and success," Ladenburg Thalmann Chairman and CEO Richard Lampen said in a press release.

The merger will create a wealth management giant with almost 11,500 financial advisors and more than $450 billion in client assets. Advisor Group CEO Jamie Price will lead the combined company, with Ladenburg executives also serving in senior leadership positions.

Pawn chess pieces surrounding a king chess piece.

Ladenburg Thalmann Financial Services and Advisor Group are joining together to form an investment management titan. Image source: Getty Images.

Now what

Price believes the merger will create an industry powerhouse with scale advantages that neither company could obtain alone.

This acquisition brings together the best of two industry leaders, to the benefit of the financial advisors we collectively serve. We believe that the investments necessary for competitively differentiated technology, practice management, products and service excellence require a greater level of scale than either of our companies can achieve on a stand-alone basis. In fact, as our two organizations learned more about each other's platforms, it became obvious that our strengths rounded out each other's offerings, and combined, we will have one of the most comprehensive and best-in-class platforms for financial advisors in the industry.

Notably, Ladenburg's firms -- which include Securities America, Triad Advisors, and KMS Financial Services, among others -- will not be merged with Advisor Group's firms. Both companies say they remain committed to a "multi-brand network model," which they believe provides advisors with greater flexibility in operating and growing their practices.

The deal is expected to close in the first half of 2020, subject to shareholder and regulatory approval.

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