British broker Tullett Prebon last night confirmed that it is in talks with New York-based GFI over a “combination”, in a deal that will create a new giant in the financial markets.
If the two sides can reach an agreement, the new company could topple Michael Spencer’s Icap as the world’s largest interdealer markets broker by headcount, and would boast an estimated value of more than £1.6bn – sparking a fresh turf war between the fierce rivals.
The merger will most likely be structured around an exchange of shares rather than cash, with British firm Tullett Prebon, led by CEO Terry Smith, likely to be the dominant partner.
Smith and Spencer have a colourful past as regular sparring partners in a testosterone-fuelled market where Icap enjoys a near 30 per cent market share. Previous rows have centred on allegations of staff poaching. Tullett said yesterday that talks were “are at an early stage and there can be no certainty that they will result in a transaction”.
GFI is the largest interdealer broker of credit derivatives, while Tullett Prebon was spun off from Collins Stewart in 2006. A combined firm would be the second-largest interdealer broker in terms of revenues and post-tax profits.
Bank of America analysts estimated that GFI shares would be valued at $12.47 (£6.30) each, or 37.5 per cent above their Wednesday closing price of $9.07 (£4.58), should GFI retain 50 per cent of the combined company.
British-born billionaire Mickey Gooch holds 47 per cent of the company. If he sells, said Citigroup, it would signal his “concern about the outlook and prospects to get the stock materially higher as a stand alone entity”. Gooch, who hails originally from Leigh-on-Sea in Essex, has been through turbulent times of late.
Previous talks over a merger with Tullett Prebon collapsed in July last year. And last month he filed a $220m (£110m) lawsuit, accusing former employee Donald Fewer of an elaborate campaign to poach 22 staff from the interbroker dealer and entice them to join rival Tradition.
As founder, chairman, chief executive and major shareholder in GFI, Gooch has a personal fortune estimated to be in excess of $1.1bn (£559m). He also owns his local New Jersey newspaper, run by wife Diane, and races the likes of Uma Thurman and Rupert Murdoch in Caribbean regattas in his 151ft yacht, which set him back $13m (£6.56m).