Cazenove profits to soar as Lehman leads suitors

Cazenove will next month reveal that profits and turnover at the leading City stock broker have recovered substantially in the 12 months to the end of April, intensifying speculation that it may shortly be taken over.

Cazenove will next month reveal that profits and turnover at the leading City stock broker have recovered substantially in the 12 months to the end of April, intensifying speculation that it may shortly be taken over.

Lehman Brothers, the US investment bank still 40 per cent-owned by its staff, is the furthest advanced with plans to acquire Cazenove, although newspaper reports last month suggested the two had walked away from talks because of disagreements over price.

Cazenove is widely considered to be worth about £800m although its chairman, David Mayhew, is understood to be holding out for £1bn.

Fresh reports emerged yesterday that Lehman Brothers is still interested in adding Cazenove to its business, which has grown substantially in the past year. Cazenove's board will discuss Lehman Brothers' interest this week.

Although the 180-year-old broking house is pressing ahead with its own plans for a stock market listing, it has received several approaches from bigger investment banks keen to acquire its unique list of FTSE 100 corporate broking clients.

As well as Lehman Brothers, other interested parties are understood to include Goldman Sachs, Morgan Stanley and possibly even Deutsche Bank.

Cazenove changed from a partnership to a corporate status in 2001 and opened itself to outside shareholders for the first time. After allowing several institutions to become shareholders, Cazenove took steps to prepare for a flotation, probably on AIM, but these were shelved as world stock markets slumped.

Since last March, however, markets have recovered and stabilised, leading to a string of initial public offerings and fund raisings. Several of these have been handled by Cazenove itself, boosting its broking and advisory business while helping its own prospects for a float. However, if it were to float it is unlikely to remain independent for long. Its close relationships with the boardrooms of Britain's biggest companies and its unrivalled network of contacts within the City of London mean it is potentially one of the City's most highly prized assets.

One of the City's most senior brokers said yesterday: "There were very strong rumours a month or so ago that they [Cazenove and Lehman Brothers] might get together but they couldn't agree on price."

Neither Lehman Brothers nor Cazenove would deny yesterday that they have held talks about a deal, although they refused to comment on the record. However, Cazenove knows there is more than one suitor for its business and that a float could still be on the cards. It has consistently maintained that it would do whatever was in the best interests of its clients and shareholders when it comes to questions of ownership.

A crucial element for any putative purchaser is whether it could successfully integrate Cazenove's team of brokers and advisers into another investment banking culture. A new owner would have to convince Cazenove's clients that the nature of their relationship with the company would not change as a result of a change in ownership.