After offloading its telephone-based “voice broking” arm, Icap will be left with its electronic broking and post trade businesses.
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The deal includes the disposal ICAP’s associated technology and broking platforms and certain of ICAP’s joint ventures and associates. The three regional businesses included in the deal employ 1,458 voice brokers.
However, trading profit before tax was up 17 per cent, to £101m.
“Inter-dealer brokers continue to play a vital role at the heart of the global wholesale OTC markets. 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”, says Tullett Prebon Chief Executive John Phizackerley.
Icap’s post-trade, risk, information and electronic markets divisions – EBS and BrokerTec, TriOptima and Reset, Traiana, Euclid and Icap Information Services which supports its electronic platforms – will operate under a new group holding company named Icap NewCo, targeting the financial technology space.
After the deal is approved by shareholders, the Chief Operating Officer of ICAP, Ken Pigaga, will resign from his current position and be appointed to the board of Tullett Prebon as a Director and Chief Operating Officer.
Voice broking is the traditional method of brokers ringing up to connect buyers and sellers, which is being increasingly challenged by the rise of electronic trading platforms, which ICAP is focusing on. “This transaction is the next natural step in this strategy”.
Its revenue fell 4% on the year to £595 million in the six months to the end of September. The Organization also manages an information sales company, Tullett Prebon Information, which rolls up, cleanses, collates and distributes realtime information to data suppliers, plus a Risk Management Services business, which provides customers with post-trade and multi-product duplicate services. “Scale benefits from an enlarged business are also likely seen helping boost revenues and counter the lower full year margins Tullett said it expected for its existing structure in Friday’s trading statement”, he adds. Barclays upped their target price on shares of Tullett Prebon Plc from GBX 365 ($5.49) to GBX 385 ($5.80) and gave the stock an equal weight rating in a research report on Wednesday, July 29th. “By 0920 on Wednesday, Icap’s shares were up 6% at 500p, while Tullett was down over 8.1% to 329.6p”.
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The new Tullett Prebon shares issued will represent 56 per cent of the share capital of Tullett Prebon as enlarged by the Transaction (the “Enlarged Group”) as at completion of the Transaction (“Completion”).
