Icap Envisages LCH.Clearnet As New Revenue Source

Icap, an interdealer broker, is planning GBP800 million bid for LCH.Clearnet, the London-based clearer of share and derivatives trades. The formal bid is expected to be two or three months later
By None

Icap, an interdealer broker, is planning 800 million bid for LCH.Clearnet, the London-based clearer of share and derivatives trades. The formal bid is expected to be two or three months later.

Icap consortium has not discussed firm terms yet, but is understood to propose a premium of 800 million for LCH.Clearnet.

Icap is run by Michael Spencer, treasurer of the Conservative Party. Interdealer brokers stand between counter-parties in bond and derivatives trades. In recent statement to the stock market Icap confirmed that it was an equal member of the consortium

“Discussions are at a very preliminary stage and there can be no certainty that such an offer will be made,” says the broker.

Possible contract with LCH.Clearnet would pave Icap the way to expand into the over-the-counter derivatives market, an independently negotiated and profitable market for structured trades.

Among Icap’s significant rivals in the battle for LCH.Clearnet are Socit Gnrale, Morgan Stanley and Depository Trust & Clearing Corporation (DTCC). Most of consortium members are big users of LCH.Clearnet and existing shareholders in the British clearer.

LCH.Clearnet has agreed a non-binding deal with DTCC, the American clearer. To be successful, Icap must scupper that agreement. Most banks and brokers are worried that a sale to DTCC would create a

monopoly and hit competition in the sector.

DTCC is a not-for-profit organisation and it envisages turning LCH.Clearnet into a similar operator within three years. It has yet to table a firm bid, but has signalled that shareholders would receive about €10 a share, which would value the company at about €739 million (650 million).

L.D.

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