ICAP has confirmed it is holding talks over the possible sale of its global broking business to Tullett Prebon.
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At present, ICAP’s market value stands at a staggering $4.4 billion (£2.9 billion), which compares to only $1.16 billion (£765 million) for Tullett Prebon.
For ICAP, the deal would help redefine the world’s largest broker of transactions between banks as a technology business.
Details are still being discussed, but an agreement would include ICAP’s technology and brokering platforms, according to company statements on Friday.
While ICAP shareholders would hold the majority of the new Tullett shares, ICAP – run by wealthy Conservative Party donor Michael Spencer – would own a minority stake in the enlarged Tullett Prebon.
Evening Standard said the two companies had been in talks for a few time and a deal could be announced as soon as next week.
“I thought it would have actually been ICAP buying Tullett’s business rather than the other way round”, Liberum analyst Justin Bates said. Finally, Barclays raised their target price on shares of Tullett Prebon Plc from GBX 365 ($5.63) to GBX 385 ($5.94) and gave the company an “equal weight” rating in a report on Wednesday, July 29th.
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 past year.
For Tullett, the acquisition of ICAP’s voice and electronic-hybrid brokerage business should allow it to streamline, saving money on the combined operation.
An impending deal between ICAP and Tullett Prebon could also see aggressive savings between one or even both entities, which reportedly could generate upwards of $106 million (£70 million) in back office savings.
Until this year, there were five inter-dealer brokers dominating a market valued at $700 trillion a year.
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In what would be the latest consolidation in the industry, Tullett said if the deal were to go through it would issue more than 100pc of its existing share capital to fund it. Operating margins will be around 1.5% below past year, prompting Peel Hunt to trim £12 million off profit forecasts.
