ICAP to Become NEX Group to Start Life After Voice Broking

Updated on
  • Tullett Prebon agreed to buy the ICAP name along with brokers
  • ICAP to sell brokers and swaps platform to Tullett this year

ICAP Plc will rename itself as NEX Group Plc once it sells its global broking business to Tullett Prebon Plc, completing its transformation into a specialist in electronic markets and post-trade services.

Chief Executive Officer Michael Spencer needed to find a new name after agreeing to include the ICAP brand in the 1.1 billion-pound ($1.5 billion) sale of the ICAP Global Broking Business in November. The deal will complete ICAP’s shift away from voice broking, a business that has suffered from shrinking margins and increased regulation.

“We believe electronic transactions are the right place to be,” Spencer said on a call to announce the new brand and the firm’s annual results. “Beneath the surface, there’s a lot of interesting things going on in the electronic space. For the last two years, it’s been bloody hard.”

ICAP’s revenue dropped 6 percent to 1.2 billion pounds ($1.7 billion) in the 12 months through the end of March, the company said in a statement on Monday. Profit before taxes declined 6.3 percent to 89 million pounds.

Sales for the assets being acquired by Tullett dropped 8.3 percent. ICAP said tougher rules for its banking customers and a loss of risk appetite accounted for the decline.

‘Tough Environment’

“We are seeing the contracting of the banks’ balance sheets and an ongoing reduction in worldwide volumes,” said Stuart Bridges, ICAP’s finance director. “It’s quite a tough environment for that business.”

Tullett plans to make the combined voice-broking business more profitable by cutting infrastructure, technology and operations costs. While Tullett may decide to reduce the number of voice brokers after completing the acquisition, it has no plans to do so during the first year of life for the combined business.

ICAP, the world’s largest broker of transactions between banks, has already lowered the number of telephone brokers it employs. It had 1,368 brokers at the end of March, down 8.6 percent from a year earlier.

The company’s departure from voice broking is expected to be completed in the third quarter of this year once Tullett Prebon receives approval from the U.K.’s Competition and Markets Authority and the U.S. Department of Justice. The CMA has a June deadline to approve or reject the deal.

Spencer said that Britain’s possible exit -- a Brexit -- from the European Union following next month’s referendum had made itself felt on his business.

“The Brexit issue has resulted in a very small diminution in market volumes,” he said during the call. “If you can discern anything, it’s around sterling instruments.”

ICAP’s shares rose 0.3 percent to 457.3 pence at 1:51 p.m. in London, while Tullett slipped 0.8 percent to 326.7 pence.