ICAP has completed the acquisition of First Brokers Securities Inc. for an initial cash payment of $35.7 million.
Further payments, which are contingent on the future performance of the business, will be made over three years, at ICAP’s option in cash or shares. In the event that the business continues to perform exceptionally well, it is anticipated that such payments will amount to circa $55 million. Irrespective of how well the business performs, the absolute maximum payable is capped at $78 million.
First Brokers Securities is the leading New York inter-dealer broker in U.S. dollar-denominated corporate debt with net assets of $3.5million and normalised post tax profits in 2001 of $10.7 million. In the global bond markets, ICAP has the leading position in broking non-corporate bonds, particularly government bonds and Euro bonds.
All 100 of the First Brokers staff will be remaining with the company, together with two of the three founding partners. The third founder is retiring from the business.
Michael Spencer, CEO of ICAP plc said “First Brokers has a very strong market position in U.S. corporate bonds which compliments our leading position in non-corporate bonds and our electronic broking capability. This adds significantly to our global bond position and, subject to market activity levels, we expect this acquisition to enhance headline EPS in 2002/3. The fit and synergies are very compelling.”
In a separate development, ICAP has acquired a 30% stake in TriOptima, a private Swedish company. TriOptima has developed the triReduce service (patent pending), which greatly reduces the outstanding costs of managing an interest rate swap portfolio.
David Casterton, Managing Director of Intercapital Europe Limited, said “ICAP is keen to encourage new developments using technology in the Interest Rate Swaps market, this system will help to increase the trading efficiency of our bank customers. The triReduce service provides our customers with an efficient way of collapsing their swap portfolios, thus releasing them from charges associated with capital and credit as well as eliminating ongoing operational costs. The triReduce service will increase efficiency and greatly reduce the cost of trading in the OTC Interest Rate Swap market.”
Brian Meese, of TriOptima, said “we are delighted to have the backing of the largest interest rate swaps broker. ICAP are providing assistance to help launch our new service together with back office, legal and compliance support. Following our successful testing of the system in a pilot project for seven banks, which ended in February, we are preparing to launch the service as soon as possible.”
Derk Brouwer, one of the founders and Director of TriOptima, said “if all the major banks in the world were to accept this service, then total savings would exceed $1 billion per annum.”