ICAP Poised for BrokerTec Deal
Thu Jan 16, 7:07 AM ET Add Business - Reuters to My Yahoo!
By Richard Lindsay and George Matlock
LONDON (Reuters) - Britain's ICAP Plc said on Thursday it was poised to clinch the takeover of U.S. electronic broker BrokerTec for up to $290 million (181 million pounds) in shares and extend its lead as a trading intermediary for banks.
ICAP, already the world's largest inter-dealer broker, has been in advanced talks to buy the U.S. group since August. But the deal has been delayed by a U.S. government investigation into alleged anti-competitive practices by BrokerTec.
ICAP, which mainly brings together buyers and sellers of bonds, derivatives and currencies over the telephone, is hoping to complete the deal after the U.S. Department of Justice (news - web sites) concludes its probe around mid-March.
BrokerTec, which was set up in 1999 by 14 investment banks, controls 85 percent of the electronic trading in U.S. Treasury bonds. ICAP has its own electronic brokerage called ETC, but unlike BrokerTec, it is not currently profitable.
"This is a deal we have been working on for a very long time," ICAP Chief Executive Michael Spencer told Reuters.
"The acquisition means that ICAP will not only be the world's largest voice (telephone) broker but also target a large market share in electronic inter-dealer broking."
ICAP, whose shares slipped 0.88 percent to 955p by 1130 GMT, plans to issue around 12 million new ordinary shares on completion of the deal and up to an additional 6.74 million depending on BrokerTec and ETC's revenues.
"It's a terrific move for ICAP, which has long been the most dynamic of the inter-dealer brokers and now has a serious chunk of the e-broking business," said one analyst at a U.S. bank, who asked not to be named. FINAL PIECE IN E-BROKING JIGSAW?
Although investment banks prefer to trade complex derivatives deals over the telephone, electronic brokerage networks have gained significant business in products such as government bonds in recent years.
"More and more products will go electronic, but the phone remains a preferred route for a lot of off-exchange derivatives deals," said a London-based derivatives trader. "What brokers need these days is a good mix of the two."
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Icap seals BrokerTec deal
16 January 2003 - Interdealer broker Icap has signed contracts to acquire select businesses of consortium-backed fixed income platform BrokerTec for up to £181 million.
Icap signed a letter of intent to acquire the majority of BrokerTec's trading operations in August 2002. The deal is conditional on regulatory approval in the US, where the Department of Justice has been investigating BrokerTec's operations for evidence of anti-competitive business practices. The probe is expected to be completed in mid-March 2003.
In the nine months to 30 September 2002 the BrokerTec businesses being acquired by Icap (excluding BrokerTec Futures Exchange and BrokerTec Clearing Company) had revenue from electronic broking and data sales of $73.0m and generated a normalised profit before tax of $14.9m.
Michael Spencer, Icap group chief executive, says the acquisition will yeild additional voice broking revenues from increased access to liquidity in benchmark bonds. "Moreover, non-overlapping Icap customers will gain the ability to access the BrokerTec platform and information vendors are expected to value the improved market data generated by the combined business," he adds.
The BrokerTec system has been created around a trading platform provided by OM Technology. Icap says that both the BrokerTec and its own ETC electronic broking platforms will "continue to be used where their specific technologies are appropriate to the markets they serve."
The company expects that there will be integration between the platforms to create a common user interface and to extend a facility for brokers to interact with BrokerTec.
In the longer term says Icap, "there will be increasing use of common technologies in the development of Icap's hybrid electronic and voice broking platforms. These common technologies will provide Icap with a successful electronic broking platform with proven functionality and low operating costs." |
