Interdealer Broker Tullett Prebon on the Block
March 10, 2010
London-based interdealer broker Tullett Prebon confirmed Wednesday that it is in talks about a possible sale of the firm.
British media reports identified possible suitors as the Bank of China and Australia’s Macquarie Group. But James Hamilton, an analyst with Numis Securities, says the most likely buyer will be a stock exchange which wants to expand in the over-the-counter market.
“The conflict and competitive nature of banking means that it is less likely to be a bank,” wrote Hamilton in a research note to clients Wednesday. “Competition or size would prevent any interdealer broker from acquiring Tullett.”
Tullett ended merger negotiations with GFI Group, the largest inter-dealer broker of credit derivative trades, in 2008. Tullett’s largest individual shareholder is its 56-year-old chief executive Terry Smith, a former head of research at UBS.
Smith was fired from UBS after publishing a book called “Accounting for Growth” that questioned the accounting practices of some of UBS’ clients. Smith has served as Tullett’s CEO since it split off from stockbroker Collins Stewart in 2006.
Firms such as Tullett and its larger competitor, Icap, intermediate trades for other firms in stocks, bonds, currencies, energy and derivatives.
Among the stock exchanges which are known for their interest in the derivatives market are Deutsche Borse, NYSE Euronext, the London Stock Exchange and Nasdaq OMX Group. Deutsche Borse is part owner of Eurex while NYSE Euronext owns the Lonson-based Liffe futures exchange. The LSE owns EDX London.
Based on the price of Tullett’s shares as of mid-day in London on Wednesday, Tullett’s valuation comes to about $1.2 billion.
By mid-afternoon, Tullet shares were up 71 pence, or 23%, at 382 pence.
