Cohen returns to i-banking

Negotiators found a simple solution to the touchy issue of valuation in the reverse merger earlier this month in which privately held investment adviser Ramius LLC bought publicly traded investment bank Cowen Group Inc.

Most financial companies today trade at a discount to the value of the assets on their balance sheets as the market tries to account for opacity and illiquid assets. But on this deal, both sides decided to sidestep the issue completely. "Rather than discounting the book value of the companies and then adding a premium to the discount, we agreed to just value both companies at book value," says a source who worked on the deal.

That value was estimated at about $450 million, with Ramius getting about 71.24% of the new company and Cowen shareholders getting the remaining 28.76%.

Ramius' acquisition of Cowen will enable the hedge fund to go public under the Cowen name after the deal closes in the fourth quarter. It marks a return to investment banking, of sorts, for Peter A. Cohen, Ramius' founder, and the former head of Shearson Lehman Hutton Inc. Cohen is most famous for encouraging F. Ross Johnson to take RJR Nabisco Inc. private in the late 1980s, although he lost that deal to Kohlberg, Kravis, Roberts & Co. Cohen started Ramius after leaving Shearson in 1990 and after a three-year stretch at Republic National Bank.

Cohen's connections from his Shearson days were apparent, chiefly in the person of Jack H. Nusbaum, chairman of Willkie Farr & Gallagher LLP, which served as Ramius' legal adviser on the transaction. Nusbaum, called "one of Cohen's closest advisers" in "Barbarians at the Gate," the seminal book on the RJR buyout, has been at Willkie since 1962 and became its chairman in 1988. Willkie has represented Ramius since its founding. David Boston worked with Nusbaum as part of Willkie's team.

For investment advice, Ramius turned to Credit Suisse Group's team of Steven Pierson, David DeNunzio and Ernesto Cruz. Cowen tapped Sandler O'Neill + Partners LP's Jimmy Dunne and Emmett Daly. For legal advice, Cowen used longtime adviser Wachtell, Lipton, Rosen & Katz, whose team, led by Ed Herlihy, included partners David Shapiro, Joshua Holmes and Jeannemarie O'Brien.

This was the same legal team that advised Cowen in December, when it rejected a $100 million bid from Rodman & Renshaw Capital Group Inc.