ICAP Plans Exit From Voice Broking to Complete Deal With Tullett

  • NEX Group abandons plan to hold a near 20% stake in TP ICAP
  • ICAP, Tullett offer to sell oil desk to obtain CMA approval

ICAP Plc will no longer own a stake in the giant voice-broking business it is creating by selling its broking units to Tullett Prebon Plc, almost completely withdrawing from an industry that it once dominated.

The company, which will call itself NEX Group Plc when the deal is completed, had planned to hold a 19.9 percent stake in Tullett Prebon, which will trade as TP ICAP. In a statement late on Tuesday, ICAP said the stock it receives through the all-share transaction will be passed directly to shareholders.

Chief Executive Officer Michael Spencer is propelling ICAP out of voice broking, a labor-intensive business that has suffered from shrinking margins and increased regulation, while Tullett Prebon almost doubles to 3,000 brokers to increase its reach, especially in the U.S. The decision to give up the stake in TP ICAP may help speed approval of the deal, which needs the blessing of more than 25 regulatory bodies.

“ICAP is fundamentally changing its business, for the better,” Liberum analyst Justin Bates said in a note. It is “firmly embedding itself in the plumbing of the global financial services industry, through its electronic & post-trade services business. The quality of earnings is consequently far better and strategically it becomes a more important and valuable asset.”

Oil Divestment

ICAP has also offered to sell its London-based oil desk to appease the U.K.’s competition regulator, which had threatened to launch a full-scale investigation into the 1.1 billion-pound ($1.6 billion) deal.

The Competition and Markets Authority has until Aug. 16 to decide whether the asset sale would prevent any lessening of competition in the oil-products market, the regulator said on Tuesday. The companies could avoid an inquiry lasting about 36 weeks if the CMA rules in their favor.

Under the deal, Tullett will buy ICAP Global Broking Business, adding the firm’s 1,368 voice brokers to its 1,727 to become by far the largest broker of deals between investment banks. Spencer’s new NEX company will be a specialist in electronic markets and post-trade services. When the firms announced the deal last year, Spencer said he was “evangelical” about the prospects for a voice-broking giant.

“We have retained that 19.9% stake for a very simple reason: we think it’s going to be a very big success,” Spencer said on Nov. 11. “Absolutely for the record, we are keeping that stake.”

A NEXit

By abandoning its holding in TP ICAP, NEX Group’s voice-broking operations will be limited to joint ventures, including one in China.

Spencer’s stake in the enlarged Tullett Prebon will increase after the completion of the transaction. He already owns 16.8 percent of ICAP, and will be handed a 9.4 percent stake in TP ICAP when the deal is completed. Spencer will also become president of TP ICAP, as announced last November.

Tullett wants to make voice broking more profitable by reducing infrastructure, technology and other back-office costs.

The CMA said it had no concerns about 19 of the 20 activities in which both companies operate, according to a June 7 statement. It received complaints from firms that it declined to name about TP ICAP’s dominance in oil products.

ICAP and Tullett still plan to complete the deal by the end of this year.

ICAP’s oil desk provides services to customers in Europe, the Middle East, and Africa. TP ICAP’s largest competitors are BGC Partners Inc. and Cie. Financiere Tradition SA.

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