Cazenove and JP Morgan close to buyout terms

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The Independent Online

Senior management at Cazenove and JP Morgan are thought to be close to agreeing a price for the blue-blooded City firm, which could see the American bank buy out the joint venture before the end of the year.

Cazenove, the Queen's stockbroker, which is enjoying a bumper 2009, joined forces with JP Morgan in 2005 when the pair created the joint venture, JP Morgan Cazenove. The deal ended Cazenove's 181 years of independence.

Under the terms of the initial agreement, JP Morgan retains an option to buy out Cazenove's interest in the joint venture next February, after an independent valuation of the business. Sources close to Cazenove say that both parties are keen to get a deal agreed earlier than the February deadline, for differing reasons.

JP Morgan is keen to structure an offer for Cazenove's stake that will ensure key talent at the firm is retained. City sources say JP Morgan has decided against filling some positions within the bank until a deal has been struck. "There is no point in replication," said one.

Cazenove, led by its chairman, David Mayhew, and its chief executive, Naguib Kheraj, has enjoyed a spectacular year advising some of the FTSE's biggest companies on rights issues and merger battles.

The broker played a key role advising Centrica, which recently bought Venture, the oil and gas company; Friends Provident, which was bought by Resolution, the firm run by insurance tycoon Clive Cowdery; and Xstrata, whose chief executive, Mick Davis, is trying to buy rival miner Anglo American.

Cazenove was also an adviser to HSBC when the bank raised £12bn through a rights issue in the spring.

In March, JP Morgan Cazenove posted pre-tax profits of £134.5m for 2008, 15 per cent down on the previous year. However, staff still enjoyed bumper bonuses, receiving more than £100m in cash and share rewards.

Mr Mayhew and Mr Naguib are currently thought to be conducting closely guarded talks with senior JP Morgan executives, with sources suggesting that plans for the company could be unveiled to the wider staff as early as next month.

A source said: "Cazenove is having a barnstorming year and I don't blame them for wanting to cash in. But JP Morgan isn't daft. It will make sure it gets what it wants out of this deal too."

Earlier in the year, reports suggested that disgruntled Cazenove executives were looking to dissolve the marriage between the pair. However, it is now thought that dissenting voices have been largely silenced as JP Morgan Cazenove has continued its stellar 2009.