Tullett Prebon and Icap combine to create broking behemoth

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Tullett Prebon has said it will acquire Icap’s global interdealer broking business for £1.1bn in an attempt to combat falling profits in a sector struggling from shrinking trading volumes.

Details of the tie-up come six days after the pair confirmed they were in talks. Michael Spencer, Icap’s chief executive, said the businesses would benefit from improved scale. Large cost cuts are also expected, with Citi, one of the advisers, predicting a 30% reduction in joint costs.

The groups said the deal provided an opportunity to combine the complementary strengths of two leading hybrid voice-broking franchises – a mix of voice and electronic broking – to create the largest player in the industry, which will achieve significant cost synergies of at least £60m.

Icap has 28% of the interdealer broking market, with Tullett accounting for 20%. The deal, which involves Tullett owning 44% of the enlarged group, has been worked on for over a year and only became possible, sources say, when John Phizackerley, the former Nomura and Lehman executive, succeeded Terry Smith as Tullet chief of in July 2014.

Spencer, a staunch supporter of the Tories, threatened to move Icap to New York before the last election in the event of Labour winning. He is also a former Conservative party treasurer.

Shares in Icap rose 6% on Wednesday on the news, although Tullett Prebon’s stock did less well, falling 7% to 333p after the issue of new shares.

Powered by Guardian.co.ukThis article was written by David Hellier, for theguardian.com on Wednesday 11th November 2015 14.46 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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