Michael Spencer’s ICAP is to take a majority stake in Tullett Prebon in the biggest shake-up of the City’s broking world for a generation, the Independent understands.
The deal between the interdealer brokers - the players who buy and sell bonds and derivatives for the big investment banks - would mark the latest consolidation phase in an industry hammered by low trading volumes and tougher regulations.
Sources said the two companies have been in talks over a deal for some time and it could be announced as soon as next week.
Icap currently dwarfs Tullett Prebon by size - it has a market value of £2.9 billion compared to £765 million. But the Independent understands Icap’s much larger electronic broking business will remain separate. This leaves Icap’s more traditional broking business to be merged with Tullett, with Icap taking the majority stake. “These talks have been going on for a while and I’m surprised it’s not come out yet,” said the source.
The pressure for a deal was underlined today by a gloomy trading update from Tullett, now led by chief executive John Phizackerley after former boss Terry Smith retired last year. Spencer will become chairman of the combined broking arm - while running Icap as a pure-play electronic broking business - while John Phizackerley will run the new broking arm
A second source said the combination could generate least £70 million in back office savings “for starters”. Another added that the rival broking businesses could be run against each other for a year and “then the strongest desks survive”.
The latest tie-up would be the second major deal in the sector this year after BGC took over GFI in April for $788 million (£519 million). Tullett - also in takeover talks in 2010 - has more recently struck smaller deals such as last year’s $112 million swoop for oil trader PVM.
The pressure for a deal was underlined today by a gloomy trading update from Tullett, now led by chief executive John Phizackerley after former boss Terry Smith retired last year. Spencer will become chairman of the combined broking arm - while running Icap as a pure-play electronic broking business - while John Phizackerley will run the new broking arm.
Tullett declined to comment, although sources said the company refused to comment on speculation. Icap declined to comment.
More to follow.
