Collins Stewart raises £55m to help funding of Prebon buy
The London-based brokerage Collins Stewart Tullett placed £55m of new shares yesterday to help fund the £69.5m purchase of the money and futures broker Prebon.
The London-based brokerage Collins Stewart Tullett placed £55m of new shares yesterday to help fund the £69.5m purchase of the money and futures broker Prebon.
The share placing was well received in the City, helping to send Collins Stewart's shares up 32p to 392p, their highest level in four years.
The acquisition, first announced in May, will help Collins Stewart to consolidate its second-place ranking in inter-dealer broking after the London-based Icap, headed by Michael Spicer.
The share placement was underwritten by Lehman Brothers, the house broker to Collins Stewart. Its shares, priced at 350p, will start trading on 13 October, the day after an EGM where the company will seek shareholders' approval for the Prebon acquisition.
Stephen Pull, the head of corporate broking at Lehman Brothers, which oversaw the placement, said: "It was very well received by the market.'' He added that the acquisition was "a very good deal, very sensible, a very good fit''. He also said that Collins Stewart hopes to get the go-ahead from the Office of Fair Trading by the time of the EGM. The deal has already had competition clearance in the US.
Industry sources said the combination of the two companies would lead to 500 to 800 people losing their jobs out of a combined workforce of more than 3,000. Collins Stewart will also assume some of Prebon's debt, bringing the total value of the acquisition to £125.3m. It will issue 5.5 million shares with a value of about £19.9m to Prebon as part of the deal.
The share surge came after Collins Stewart announced a better-than-expected cost savings target, analysts said.
The firm hopes to reap £60m in cost savings annually from combining Prebon with its broking business, which will involve a one-time restructuring charge of £80m by the end of next year. There will be "substantial" costs linking the two office networks and upgrading the system, said a source close to the deal. The cost savings will be partly offset by an estimated drop in brokerage revenue of about 5 per cent, the company said.
There are no further acquisitions in the pipeline, Terry Smith, the chief executive of Collins Stewart, said, adding: "If we bought another business, we would have an awful lot of overlap. It might also present competition problems.''
Collins Stewart also reported that pre-tax profits rose to £39.4m in the first half of its financial year from £27.7m a year earlier. Keith Hamill, the company's chairman, said: "Conditions have been more difficult than earlier in the year in some of the key markets in which we operate."
Prebon employs 1,650 people in 23 offices, while Collins Stewart has some 2,100 staff in 21 locations, with 1,700 working in the Tullett Liberty business.
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