Jefferies stake building in Numis could lead to bid

Numis Securities, one of the City's fastest growing broking and advisory houses, has held talks with Jefferies & Co of the United States about the American company taking a substantial stake in its business in an attempt to gain a presence in Europe. The New York and California-based company has also expressed an interest in buying Numis outright, though it is thought to prefer at this stage to buy a stake, of about 20 per cent.

Numis Securities, one of the City's fastest growing broking and advisory houses, has held talks with Jefferies & Co of the United States about the American company taking a substantial stake in its business in an attempt to gain a presence in Europe. The New York and California-based company has also expressed an interest in buying Numis outright, though it is thought to prefer at this stage to buy a stake, of about 20 per cent.

Numis is understood to have held a series of talks with Jefferies, which is worth $500m (£278m), starting a few months ago. Buying a fifth of Numis' shares, which have risen strongly in the past year, would cost £20m. Jefferies, which specialises in offering trading and capital raising for small and medium sized companies in America, also looked seriously at buying Panmure Gordon as part of its strategy to gain a foothold in Europe, but that business was sold by its German owners WestLB to Lazard.

Oliver Hemsley, the chief executive of Numis, said yesterday: "There are no strategic discussions going on between Numis and Jefferies." However, sources close to the situation said in recent weeks Jefferies was making it clear it was interested in buying a significant minority stake in Numis.

Numis has gained a strong reputation as a successful niche player in the broking and advisory world, starting with a series of insurance clients but having now branched out into other sectors. Its chairman is Michael Spencer, the colourful chief executive of inter-dealer broker Icap, who holds a substantial stake in Numis. Mr Hemsley and other senior employees also own large chunks of its equity.

Observers believe there are a number of reasons Numis may want to sell itself now. One is that employees are tied into an options scheme, which is understood to vest in September and could prompt some of its most successful employees to go elsewhere. Another reason is that Numis, which has made a lot of money from the large number of insurance clients it still has on its books, may be keen to find a buyer before the cycle turns in the insurance world and times start to become much tougher for that sector. One source said: "Jefferies does small and mid-cap, which would be a good fit with Numis. But, after it looked at Panmure, it realised it made more sense for that business not to be owned from the US, but it could take a stake in Numis instead."

There is speculation that there will be a wave of consolidation among smaller brokerages this year. Panmure received at least five bids. As well as the interest expressed in it by Jefferies, Durlacher and Teather & Greenwood bid for the business. Collins Stewart also considered buying it, but instead brokered a deal to take its convertible debt team.