Tp icap has agreed to buy us equities trading business liquidnet, in a $575m deal that pushes the london broker into the share trading fund the acquisition, tp icap will launch a rights issue to raise about $425m and will pay only half the 94m dividend that it had proposed for the rest of the year.
The purchase price for liquidnet could increase to $700m, depending on other payouts and performance targets.
The deal comes less than a year after tp icap finished bedding down its 2016 acquisition of icap for 1.3bn. trading in its core markets of interest rate swaps and commodities has slowed over the summer and its share price has halved, giving it a market capitalisation of 1.3bn. after the liquidnet deal was announced on friday morning, its shares fell as much as 3 per cent.
Liquidnet is being sold only six months after founder and chief executive seth merrin stepped down after 20 years.
Mr merrin left three months after he and liquidnet were served a lawsuit by the companys former global head of talent acquisition, alleging sexual harassment by both mr merrin and other executives at the company. liquidnet and mr merrin have filed a motion to dismiss the claim and the two sides are in discussions about a settlement, according to us court records.
Nicolas breteau, tp icap chief executive, described the deal as a unique opportunity to transform tp icaps growth prospects.
It will widen the groups access to a fast-changing market where complex deals are increasingly negotiated electronically rather than over the phone, and between dealers and fund managers, rather than between banks.
Liquidnets customer base of 1,000 fund managers will help tp icap compete with larger rivals such as tradeweb, marketaxess and bloomberg in the market for electronic trading of credit and fixed income icaps 2,700 brokers act as middlemen for trading complex swaps, commodities and bond deals. liquidnet runs a private marketplace where fund managers with large equity stakes can buy and sell without moving the price on the open market.
Tp icap will increase its growth targets from low single-digit to mid-single digit in the medium term after the deal. it also expects to increase its shrinking operating margins above 20 per cent and will spend 25m-30m to prepare liquidnet to compete in the electronic credit trading market. underlying earnings per share are expected to improve in the third year of ownership.
The rights issue will be underwritten by hsbc, one of its corporate brokers, and put before shareholders in january. it already has the backing of 29 per cent of shareholders.
Hsbc is also the joint financial adviser and sole global co-ordinator for the deal. peel hunt is tp icaps other corporate broker.