June 4 (Bloomberg) -- Cowen Group Inc. stock soared 36 percent in New York trading after the boutique investment bank agreed to cede control to Ramius LLC, a closely held advisory firm with $7.7 billion in assets under management.

Ramius shareholders will receive 37.54 million shares of stock in Cowen, while an unidentified Ramius investor will get 2.71 million shares, the two New York-based companies said today in a statement. Ramius stockholders will control 71.24 percent of the outstanding shares after the deal is complete.

The combination with Ramius comes after Cowen rejected a cash-and-stock offer of $7 a share from investment bank Rodman & Renshaw Capital Group Inc. in December, saying the union probably wouldn’t make the firms stronger and would distract them amid a “challenging environment.”

“The landscape has changed dramatically and we think we’re an early mover to get in front of this wave of consolidation,” Cowen Chief Executive Officer and President David M. “Greg” Malcolm said in an interview. “There is going to be great consolidation in this business as everyone sorts out how many chairs there are left at the table when the music stops.”

Ramius founder Peter Cohen will become chairman and chief executive officer of the new firm, which will retain the Cowen Group name. Malcolm will continue as CEO and president for the broker-dealer subsidiary.

‘Client Needs’

Cowen plans to add fixed-income sales and trading as well as fixed-income origination and real estate banking, Malcolm said.

“We are going to pick our specialties and try to be very good in whatever they are,” Cohen said in an interview. “This is all about providing what a client needs and not what you want to sell them.”

The new company has a book value of more than $450 million as of March 31, the statement said. The deal calls for Cowen to buy the remainder of a Ramius fund of funds from an unidentified third-party investor, and the entire transaction should close in the fourth quarter.

The combined company will trade on the Nasdaq under the Cowen ticker and will have 578 employees. Ramius will continue as the investment advisory subsidiary offering hedge funds, fund of funds and real estate investments.

Cowen rose $1.75 to $6.59 at 4 p.m. in Nasdaq composite trading. The shares have fallen 20 percent in the past year.

Credit Suisse Group and Willkie Farr & Gallagher LLP served as financial advisers and legal counsel to Ramius. Houlihan Lokey also provided advisory work.

Cowen was advised by Sandler O’Neill & Partners LP and law firm Wachtell, Lipton, Rosen & Katz.

To contact the reporters on this story: Elizabeth Hester in New York at ehester@bloomberg.net; Josh Fineman at jfineman@bloomberg.net.

Last Updated: June 4, 2009 16:39 EDT