EBS is owned by a 13-member bank consortium which includes currency dealers UBS, Citigroup, HSBC and JP Morgan Chase.

Under the terms EBS shareholders are being offered $775 million in an all-cash option, or a cash and stock option whereby up to a third of the deal will be settled in new Icap shares. Under the cash and stock deal, up to 36.1 million new Icap shares will be issued alongside $517 million to be paid in cash. Icap says this would push the purchase price up to $825 million.

In a statement, Icap says it will combine the EBS electronic spot foreign exchange system with its electronic broking business to create a single global multi-product platform.

"This platform will provide customers with more efficient electronic trade execution, reduced integration costs and give access to broad liquidity across a wide product range," says Michael Spencer, group chief executive of Icap.

Icap says it expects at least $32 million in annual cost savings by 2008/09 from combining the businesses. Savings will come from network infrastructure, IT and property costs. But the broker will incur exceptional costs of $24 million in the first two years following the acquisition.

Following the transaction, senior management of EBS including both Jack Jeffery, EBS's chief executive officer, and Stephen Caplen, head of finance, will remain with the business within the Icap Group.

Icap said in November that it was seeking acquisitions to expand its electronic trading business following a steep rise in e-trading volumes. In 2003 the broker bought electronic fixed income platform BrokerTec for $240 million.

Icap shares soared on news of the deal, rising 53.75 pence to 531.00 pence in morning trading.