Tullett Prebon is to acquire Icap's hybrid voice broking and information businesses for about £1.1 billion in a reverse takeover deal.
The deal is representative of industry pressure for consolidation amid shrinking trading volumes, creating the largest global hybrid voice broking franchise in the industry.
Under the terms of the transaction, which includes Icap's associated technology and broking platforms, including iSwap and Fusion and certain of Icap's joint ventures and associates, Tullett shareholders will hold 44% of the enlarged group, while existing Icap shareholders will own 36.1% and Icap the remaining 19.9 percent.
Rupert Robson, chairman of Tullett Prebon, says: "The rationale for the acquisition is compelling: it fast-tracks our growth strategy and offers a powerful value proposition to our clients. We shall benefit from greater scale, resources for technological development and new product development and we believe that the acquisition can deliver attractive financial returns for shareholders.”
Initially, the combination is expected to dilute Tullett's earnings per share in the first year, although the company anticipates cost synergies of £60 million, principally from the elimination of duplicated management and support costs. At least 40% of the savings will accrue from a consolidation onto common technology platforms.
Tullett Prebon says its ambition is to grow its information business to global significance starting from combined revenue of approximately £847 million.
The company says it will "increase the resources available to invest in technological solutions, realigning the mix between owned and outsourced platforms to maximise Tullett Prebon’s intellectual property and speed the delivery of a modular, streamlined approach to platform development".
The post trade, risk and information and electronic markets divisions of Icap will operate under a new group holding company Icap NewCo, and will include EBS and BrokerTec, TriOptima and Reset, Traiana and Eclid.
Icap chief Michael Spencer, says: “Icap NewCo will emerge from this transaction as a pure post trade services and electronic trading group. next natural step in this strategy. ICAP has a long history of investing in innovative products and new technologies. We have been at the forefront of the electronification of trading infrastructures and have continued to invest heavily in risk mitigation and efficient workflow solutions. This, combined with a top class management team with a strong track record of successful innovation, means that Icap will be better positioned to capitalise on the increasing demand for electronic and post trade products and services.”
Sic month interim results posted today show revenue from Icap's post trade, risk and information divisions rising by eight percent, while global broking revenue was down 14%.