ICAP broking arm bought by Tullett Prebon for £1.1 bn, hundreds of jobs to go

Hundreds of jobs are set to go

The merger leaves three remaining interdealer brokers (Getty)

Tullet Prebon has agreed to buy ICAP's voice broking and information business in a deal that will create a £1.5 billion City broking giant.

Hundreds of jobs are set to go in a back office bonfire to find £60 million in savings.

The deal - rushed over the line after news of the talks to merge their voice broking arms last week - will create a new company called TP Icap with £1.5 billion in combined revenues and more than 5000 staff. The merger leaves multi-millionaire Icap founder Michael Spencer free to focus on electronic broking, accounting for more than three-quarters of Icap’s profits.

Tullett Prebon chief executive John Phizackerley said: “Inevitably what we’re aiming for is a single support staff infrastructure between the two organisations.” Asked whether that meant hundreds of job losses among the new company’s 2000 support staff, Phizackerley added: “That would be a logical conclusion but I’m not putting a number on it today.”

This is the third and largest deal struck by Phizackerley since he took over at Tullett Prebon last year. He and Spencer have been in discussions over a potential merger for “many months” since Tullett’s former boss Terry Smith - who famously feuded for years with Spencer - stepped down.

The merger leaves three remaining interdealer brokers, which buy and sell blocks of bonds and derivatives for investment banks. The sector has been squeezed by tougher regulation and lower trading, volumes prompting BGC to snap up rival GFI earlier this year.

A “pretty ambitious” Phizackerley refused to rule out further wheeler-dealing with the combined group’s “financial muscle”. TP Icap will have a bigger footprint in Asia, strengthen its equities, data and energy businesses as well as a regaining its footprint in the US. Tullett received $100 million from BGC this year to settle a lawsuit over broker poaching in the US dating back to 2009.

Tullett has issued 309.9 million shares to pay for Icap’s voice broking arm, worth around £1.1 billion. It will own 44% of the new company with Icap shareholders getting 36.1 per cent and the new Icap retaining a 19.9 per cent stake.

The stand-alone Icap is also freed from the higher capital constraints imposed by the Financial Conduct Authority watchdog on its voice broking business, despite it contributing less than a quarter of profits.

Spencer said the group was “significant excess of capital”. “Effectively it liberates is to potentially make acquisitions and we have a greater amount of cash that we can deploy to fund start-up ventures.”