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10 November
Hawkeyes have been on Tullett Prebon and ICAP of late, with talks of the two Hulks of the inter-dealer money brokerage business undergoing a merger. The move would see Tullett Prebon acquiring its rival’s global broking business in exchange for new shares worth in excess of £800 million, larger than its current market value of £800m.
John ‘Phiz’ Phizackerly, the current Tullett boss and former Lehman Brothers executive, would play the role of Nick Fury leading the new brokerage venture, while Tory donor Michael Spencer will play a more secondary role in the firm, maintaining the remaining ICAP business.
With the brokerage industry being squeezed by the lycra jumpsuit that is reduced trading volume – a consequence of a tighter regulatory environment – as well as low interest rates, a joint venture from the rivals is a smart move. With ICAP’s strength in the electronic trading and brokering sector, having under its belt the iSwap, Brokertec, and the EBS Market platforms, the merger with Tullett’s existing business would see Tullet becoming a more modern, consolidated firm, ready to hammer at the challenges faced today and in the future by inter-dealer brokerage firms with the strength of Thor.
And the markets agree – share prices for Tullett increased by 9% when news of the deal broke out, after a previous 12% fall following a profit warning. ICAP’s shares followed suit, rising sharply, a sign of increased confidence in the firms as well as the proposed strategy. Neil Welch, analyst at Macquarie Capital also agrees, commenting that new synergies between the firms could carry them through the challenging trials faced by the sector.
If the merger takes place, Tullett would become one of only three major players in the inter-dealer brokerage business, after a similar deal where BGC Partners purchased GFI Group for £519 million in April, leaving BGC, Tullett, and the Swiss giant Tradition the main players.
With both companies making cuts to employee numbers in recent months, and “massive” pressures imposed by trading regulations and the shift to electronic trading, this merger could mean greater stability for both shareholders and employees of Tullett Prebon and ICAP, a welcome result in a world of uncertainty Ultrons and worry War Machines.
Duke Fay
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