11th Nov 2015 07:32
LONDON (Alliance News) - Interdealer brokers Tullett Prebon PLC and ICAP PLC reached an agreement on Wednesday for Tullett to buy ICAP's voice broking and information business in a deal which will see ICAP and its shareholders own a majority of Tullett.
Under the terms of the offer, Tullett will issue shares to ICAP shareholders and to ICAP in consideration for the acquisition. The new shares will represent a 56% stake in Tullett's enlarged share capital and ICAP shareholders will own 36% of the company, while ICAP itself will own 20%.
Tullett said it thinks it can extract around GBP60.0 million in cost synergies from the deal, which will be beneficial to its earnings following the transaction.
"This important acquisition will deliver to Tullett Prebon shareholders significant cost synergies and gives the combined business greater client and product coverage and a stronger global footprint. It brings important benefits for clients, shareholders and staff and creates a strengthened platform to deliver our objectives of becoming the world's most trusted source of liquidity in hybrid OTC markets and the best operator in global hybrid voice broking," said John Phizackerley, Tullett's chief executive.
"Today we announce a compelling opportunity to bring together two world class, client focused broking businesses, both with a proud heritage. By coming together they will benefit from improved scale, allowing for a significantly improved product suite and service for customers," said ICAP Chief Executive Michael Spencer.
Following the transaction, ICAP's post trade, risk and information and electronic markets divisions will all operate under a new group holding company focused on the financial technology space. On completion of the deal, Ken Pigaga, the chief operating officer of ICAP, will resign and take up the role of chief operating officer at Tullett.
The deal was revealed as ICAP announced its interim results for the six months to the end of September, with pretax profit rising to GBP83.0 million from GBP36.0 million a year earlier, despite revenue falling to GBP595.0 million from GBP620.0 million. It will pay a flat interim dividend of 6.60 pence per share.
The majority of the profit was driven by its electronic markets and post-trade risk divisions and came despite ongoing cyclical and structural challenges in the interdealer broker markets.
"Since our first quarter trading update low levels of volatility have continued in both rates and G7 currencies, risk appetite remains subdued and the timing of any interest rate moves remains uncertain. Despite this challenging backdrop, we remain well positioned to benefit from any future improvement in trading conditions," said Spencer.
By Sam Unsted; [email protected]; @SamUAtAlliance
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