ICAP’s global broking business together with iSwap totaled GBP808 million ($1.25 billion) in the year to March 31, compared with ICAP’s total revenue of GBP1.28 billion.
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“It accelerates ICAP’s transformation to being a financial technology business while still giving it the ability (via the issue of the new Tullett shares) to benefit from the likely significant cost savings available to Tullett by its “doubling-up” in voice/hybrid broking”, he said. This leaves Icap’s more traditional broking business to be merged with Tullett, with Icap taking the majority stake. Tullett now has a market cap of £ 853 million.
The acquisition, which is still under discussion and yet to be completed, is the latest shake-up for the squeezed broking business of the City of London. Tullett Prebon also declined to comment. “Synergies could allow them to counteract the structural and cyclical” forces weighing down on the sector, though more details about the transaction are needed to see how it would create value for shareholders.
In an earlier statement Friday, Tullett said it was to cut about 5% of its voice brokers.
The mid-cap broker said the full-year underlying operating profit margin is now expected to fall 1.5pc short of last year’s figures, as a result of increased investment costs and a slump in revenue in the second half of the year.
Brokerages have been struggling recently, and Tullett’s trading statement this morning blamed “The continuation of low interest rate conditions and compressed bond market spreads in Europe” along with “the more onerous regulatory environment applicable to many of our bank customers whose trading activity has been suppressed by the deleveraging of their balance sheets and lower risk appetite”.
ICAP has sought to transform itself into a company centered on electronic markets and post-trade services.
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“Consolidation in this industry, and the disappearance of a few names, is inevitable”, said Frederic Ponzo, managing partner of consultancy Greyspark.
