J.P. Morgan is close to buying out British stockbroker Cazenove in a deal likely to be worth almost Ł1 billion ($1.7 billion) and trigger windfalls for dozens of London's top dealmakers.
Talks are continuing between the two sides, people familiar with the matter said on Monday, and it appeared likely the US investment bank would seal a deal shortly.
JP Morgan Cazenove was set up as a joint venture five years ago, whereby the US investment bank took 50% ownership. Both sides have the right to trigger a full takeover by J.P.Morgan in February, under put and call options.
J.P. Morgan is in advanced talks to pay 500-525 pence per share for the remaining stake, the Financial Times reported, citing people familiar with the matter.
Cazenove declined to comment, while J.P. Morgan was not available for comment. J.P. Morgan has in the past declined to comment on the matter.
Reuters reported last month the US bank was keen to decide on whether to buy out its partner before bonuses are set for staff around the turn of the year, citing industry sources. One source said then that a deal at about 500 pence per share would be reasonable.
At 500 pence per share Cazenove would be valued at just under Ł1 billion, and the joint venture at double that.
Cazenove shares do not trade on an open market, but can be bought or sold on an “internal market” during narrow windows twice a year. They last traded at about 260 pence in March, up from 240 pence at the start of the year but down from 350 pence at the end of 2007.
European bank shares have almost doubled since March as financial markets have revived, and JPMorgan Cazenove has advised on most of the biggest capital markets deals of the year, including rights issues by HSBC, Xstrata, and the ongoing record cashcall by Lloyds Banking Group.
The joint venture has proved successful in spite of doubts at the time about the marriage of the Queen's stockbroker with a US investment bank. In reality, it has provided Cazenove with access to J.P. Morgan's huge balance sheet at an essential time.
Cazenove's origins date back to the early Huguenot financiers, and Philip Cazenove set up the beginnings of the firm in London in 1823.
The stockbroker prides itself on its deep and strong ties across the City of London, and many of its bankers have been at the firm for decades and stand to reap a windfall from a deal.
David Mayhew, the chairman who joined Cazenove in 1969, is in line for an Ł18 million payday, based on his ownership of 3.6 million ordinary shares.
Top dealmakers such as Ian Hannam, head of corporate finance, and Alan Carruthers, head of equities, are also in line for millions of pounds.
Just under half of Cazenove's shares are owned by current staff, about 9% is owned by institutions and the rest are owned by former partners. There were 188 million ordinary shares in issue, according to its 2008 annual report.
JPMorgan Cazenove made a pretax profit of 134.5 million pounds in 2008, down 15% from the year before. (Reuters)