Icap beats Collins Stewart in fight for US dealer with knockout bid

Michael Spencer was celebrating last night after his Icap trading house won a three-year tussle to take control of the world's largest currency dealer.

Icap is paying $775m (£455m) for EBS, a highly sought after foreign exchange and commodities platform. The perception in the City yesterday was that this deal is a blow to Collins Stewart, led by the pugnacious Terry Smith.

Collins Stewart bid $750m for the business and is now left without an electronic trading platform that it is said to have been desperate to acquire.

Mr Spencer did not discuss Collins Stewart directly, but did claim that some competitors would be "absolutely gutted". Mr Smith did not return a call.

Nasdaq and Cantor Fitzgerald are also thought to have made losing bids.

In 20 years, Mr Spencer has taken Icap from nothing to become the biggest trader of bonds in the world.

The acquisition of EBS could potentially revolutionise dealing in the City of London. Traders will soon be able to deal in bonds and currencies from just one computer, a development that could also hurt Reuters, the other major player alongside EBS in currency dealing.

EBS, until yesterday, was owned by a consortium of 13 banks including Barclays, Royal Bank of Scotland and HSBC. They can either take cash or a mixture of cash and Icap shares. Icap predicts cost savings of $32m (£19m) from merging the two companies, with a small number of job losses likely. Once the takeover goes through, deals worth $1.25 trillion will pass through the hands of Icap traders every day.

The chief executive of EBS, Jack Jeffrey, will remain with the merged business.

Mr Spencer said the logic for the deal is the same as that driving consolidation in stock markets. By merging IT systems, trading costs should fall sharply.

Icap shares jumped on the news, closing up 51.5p at 528.75p. Mr Spencer has 22 per cent of its stock, worth about £700m.

On the future for the London Stock Exchange, Mr Spencer said he favours a merger with Euronext, the pan-European exchange that owns the futures market Liffe.

He said this deal, as opposed to one with either of the New York exchanges, "would be better for European financial markets".

He was also highly complimentary about the chief executive of the LSE, Clara Furse. "I think [the LSE] has done an outstanding job. She has played a blinder in making the best of the LSE. She deserves 11 out of 10. The City of London should commend her," he said.

Mr Spencer has lately been playing down his reputation as a gambler who enjoys a lengthy night out. Hiring Robbie Williams to sing at his 50th birthday last year may not have helped this strategy.