Evan Vitale Consulting: Tullett Prebon in Talks to Buy ICAP's Global Brokering Business

LONDON — The British brokerage firm Tullett Prebon said on Friday that it was in discussions with ICAP to acquire its British counterpart’s global brokering business, which acts as a middleman for trading stocks, currencies and commodities.

The transaction, if completed, would expand Tullett Prebon’s traditional intermediary business at a time when so-called interdealer brokers have been hit by lower trading volumes as they face uncertainty in the global markets and higher regulatory costs.

The deal would include ICAP’s global brokering business; associated technology and brokerage platforms, including its electronic interest-rate swap platform iSwap; ICAP’s associated information services revenue; and some of ICAP’s joint ventures.

Under the deal, Tullett Prebon said it would expect to issue new stock equal to more than 100 percent of its existing share capital. A majority of the new shares would be distributed to ICAP’s shareholders and ICAP would retain a minority stake in Tullett Prebon.

“Discussions regarding the transaction are currently ongoing, and there can be no certainty that any transaction will be agreed,” Tullett Prebon said in a news release.

ICAP confirmed separately on Friday that it was in discussions with Tullett Prebon.

Both ICAP and Tullett Prebon have found themselves caught in recent years in a scandal over the manipulation of the London interbank offered rate, a global benchmark interest rate known as Libor.

Three former brokers from ICAP and one former broker from Tullett Prebon are on trial in London on criminal charges that they conspired to manipulate Libor.

In 2013, ICAP agreed to pay about $87 million in fines to British and American authorities related to accusations of attempted manipulation of Libor as it was tied to the Japanese yen.

It was also fined 14.9 million euros, or about $16 million, this year by European antitrust authorities, who claim the firm had breached antitrust laws by assisting efforts by several banks to rig Libor. ICAP said at the time that the fine was “wrong both in fact and in law” and related to conduct for which it had already settled.

ICAP’s global brokering business acts an intermediary for businesses and individuals looking to trade a variety of asset classes, including bonds, commodities, currencies, interest rates and stocks.

The global brokering business focuses on so-called voice brokering, in which orders are negotiated on the phone, rather than through electronic orders, as well as a hybrid of voice brokering and electronic trading. It had 1,458 voice brokers as of the end of March.

The business operates in 37 locations in 23 countries, including one in Jersey City.

It is by far ICAP’s largest revenue generator, but it has experienced declining revenue in recent years.

The businesses being sold generated revenue of 808 million pounds, or about $1.2 billion, in ICAP’s 2015 fiscal year, which ended in March. That is down from revenue of £913 million in fiscal 2014 and revenue of £992 million in fiscal 2013.

Over all, ICAP, which would retain its electronic trading and post trade risk businesses, posted revenue of £1.28 billion in fiscal 2015.

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