INVESTMENT bank Jefferies, owner of UK corporate broker Hoare Govett, yesterday said it will merge with one of its largest shareholders, US holding group Leucadia National Corporation, in a deal valued at $3.6bn (£2.9bn).
The bank, which has its European headquarters in the City, has agreed to approve an all share deal giving shareholders 0.81 Leucadia shares per Jefferies share, in a move designed to shore it up against future industry headwinds.
As part of the tie-up, Jefferies chief executive Rich Handler will take the reins as chief executive at Leucadia, with its current president Joseph Steinberg becoming chairman of the combined group when the deal closes early next year.
Leucadia, dubbed a mini Berkshire Hathaway for the diverse range of subsidiaries under its umbrella, adds Jefferies to a portfolio that includes US beef processor National Beef, lumber firm Idaho Timber and a portfolio of luxury wineries on America’s west coast.
The firm already owned 28.6 per cent of Jefferies before yesterday’s announcement, and has a close working relationship with the management at the firm.
“I’ve thought about this for my entire career,” Handler said yesterday. “Over the course of five years we’ve thought about it, but the stars haven’t really aligned until today.”
Jefferies Group, which bought historic City broking institution Hoare Govett from Royal Bank of Scotland in February, has its European subsidiary, Jefferies International, headquartered in London.
A source at Jefferies’ London office yesterday said it would be “business as usual” for the firm’s European operations.
Jefferies will maintain its own credit rating separate from Leucadia and will also continue to file separate regulatory filings.
The deal, which was advised on by some of Wall Street’s biggest banks including UBS and Rothschild for Leucadia and JP Morgan and Citigroup for Jefferies, will leave Jefferies shareholders owning 35.3 per cent of Leucadia’s stock after the deal closes.
Shares in Jefferies, listed on the New York Stock Exchange, shot up 14 per cent yesterday as markets cheered the news.