The City brokerage Collins Stewart Tullett has called off takeover talks with a US private equity consortium after failing to agree on price. It will push ahead with plans to deliver a big cash windfall for shareholders and move into electronic broking.
The shares suffered their biggest decline since 2000 and closed down 45.5p at 574.5p.
US firms Blackstone Group, Kohlberg Kravis Roberts and Hellman & Friedman had joined forces to launch a combined bid for the broker last Friday. Two potential offers for the whole or parts of the business were rejected as too low by Terry Smith, Collins Stewart's chief executive, who terminated the talks on Tuesday. The price has not been revealed, but up to 660p a share was thought possible, which would have valued the overall business at nearly £1.4bn.
The broker said that during the discussions it had "become apparent that the terms of any such offer would not satisfy shareholders' reasonable expectations about the valuation of the business." It added that would now "pursue other means to deliver value to shareholders." That is thought to include taking on debt to leverage up the balance sheet, returning cash to shareholders (a share buyback of around £400m is thought possible) and moving into electronic broking and new products.
Analysts believe Collins Stewart needs to get into electronic broking to catch up with rival Icap, which has invested heavily in that part of its business since 2000. Geoff Miller, at Bridgewell, said: "We believe they need an electronic trading platform and will probably have to acquire one, as development could be too lengthy and costly." Possible targets include Creditex, a US-based e-trading platform in credit derivatives.
Shares in Collins Stewart had risen strongly since it revealed in mid-August that it had received a number of takeover approaches, though it never publicly named its suitors. Word in the City was that would-be buyers planned to sell the firm's stockbroking arm and relist the remaining inter-dealer broking business in New York, where similar stocks trade at higher premiums and capital requirements are more favourable.
Blackstone and Hellman & Friedman were also involved in the failed bid for the British energy group Drax, which ended talks with a US consortium on Wednesday.