Legal Business Blogs

Dealwatch: Magic Circle firms lead on major City broking merger

Clifford Chance and Allen & Overy (A&O) are orchestrating a tie-up between two of the City’s most storied brokers, Icap and Tullett Prebon, as the market consolidates in response to low trading volumes and tougher regulations.

Icap, which was founded by Michael Spencer in 1986, is in talks to sell its traditional voice-broking business to rival Tullett Prebon. If the deal completes, it would be the second major shakeup in the industry this year, with Howard Lutnick’s New York firm BGC Partners winning a bidding war to pay £519m for GFI Group earlier this year.

Icap, which remained the largest interdealer broker in the world after BGC’s takeover of GFI, is in talks to transfer its global broking business to Tullett Prebon in a deal which would see Tullett Prebon issue shares to Icap’s investors to pay for it. The deal, which would make Icap a minority shareholder in the new company, is understood to be worth over £1bn and would see around 1,500 brokers move to Tullett Prebon.

The brokers have instructed Magic Circle law firms, with Clifford Chance advising Icap and A&O advising Tullett Prebon. A&O corporate partner Richard Hough is leading the advice to Tullett Prebon, acting opposite Clifford Chance’s Steven Fox, who was instructed by Icap.

Simmons & Simmons corporate partner Colin Bole is acting for Icap’s team of advisers JP Morgan and Evercore, while Ashurst duo Jonathan Parry and Dominic Ross were instructed by Tullett Prebon’s adviser Rothschild.

Interdealer brokers, which match buyers and sellers in currency, bond, share and other trades, have struggled with stricter regulation forcing banks to cut back on trading. Tullett Prebon cut 200 jobs in March in response to difficult market conditions and falling profits.

If Icap’s deal to offload its traditional broker business to Tullett goes through, the FTSE 250 company will be left as a technology-focused business made up of electronic broking and risk management services. Tullett Prebon, meanwhile, would replace Icap as the world’s largest interdealer broker.