Icap and Tullett Prebon merger sees brokers braced for cuts

John Phizackerley of Tullett said job losses would be ‘a logical conclusion’

Russell Lynch
Thursday 12 November 2015 02:20 GMT
Comments
The sector has been squeezed by tougher regulation and lower trading volumes
The sector has been squeezed by tougher regulation and lower trading volumes

Hundreds of jobs are at risk after Icap and Tullett Prebon sealed plans to create a £1.5bn City broking giant and said the deal would generate at least £60m in savings.

The deal – to merge the voice broking arms of both companies – will create a new company called TP Icap, with £1.5bn in combined revenues and more than 5,000 staff. It leaves the multimillionaire Icap founder and former Conservative Party treasurer Michael Spencer free to focus a new standalone Icap on electronic broking, which contributes more than three-quarters of Icap’s profits.

John Phizackerley, Tullett Prebon’s chief executive, 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 2,000 support staff, Mr Phizackerley said: “That would be a logical conclusion but I’m not putting a number on it today.”

The deal is the third and by far the largest struck by Mr Phizackerley since he took over at Tullett Prebon last year. He and Mr 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 Mr Spencer – stepped down.

Tullett has issued 309.9 million shares to pay for Icap’s voice broking arm, worth about £1.1bn. It will own 44 per cent of the new company with Icap shareholders getting 36.1 per cent and the new Icap retaining a 19.9 per cent stake. Mr Spencer, who floated the deal with the Tullett boss almost as soon as Mr Phizackerley took over, will hold the honorific title of president of the new broker but has “plenty of skin in the game” as his IPGL private investment vehicle will own 6 per cent.

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. Swiss-based Tradition is the third major player. Mr Phizackerley refused to rule out further wheeler-dealing.

TP Icap will have a bigger footprint in Asia, strengthen its equities, data and energy businesses, and regain its footprint in the US. Tullett received $100m (£66m) from BGC this year to settle a lawsuit over broker poaching.

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 overall group profits.

Mr Spencer said Icap as currently constructed had a “significant excess of capital”, leaving a spin-off of the voice broking operation “inevitable at some stage”. He added: “Effectively it liberates us to potentially make acquisitions and we have a greater amount of cash that we can deploy to fund start-up ventures.”

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in