ICAP to close money-losing equity-sales business
Tuesday, 23 March 2010
LONDON, Mar 22 (Bloomberg): ICAP Plc, the largest interbank broker, said it will close its money-losing cash equities business and fire or reassign 114 employees after failing to find a buyer or partner for the unit.
ICAP expects closing the sales, trading and research operations in Asia and Europe will result in a pretax charge of as much as 51 million pounds ($76 million), the London-based broker said in a statement. ICAP will report operating losses of about 25 million pounds for the discontinued businesses in the year ended March 31 as a separate item.
ICAP invested in new businesses in the past two and a half years to expand beyond its core voice and electronic broking, derivatives and post-trade services. ICAP announced a review of its cash equities operations on Feb 15 after Chief Executive Officer and founder Michael Spencer cut the company's outlook for full-year profit, saying new ventures were taking longer than anticipated to become profitable.
"Today's news may further result in the market questioning the future of ICAP's historically successful acquisition strategy," Vivek Raja, an analyst at Panmure Gordon & Co. in London, wrote in a note to clients.
ICAP has been trying to find a partner or buyer for the unit, and has held talks with State Street Corp, the world's second-biggest money manager for institutions, about cooperating in recent months, said five people close to the matter who declined to be identified because the talks are private.
ICAP fell 12.8 pence, or 3.3 per cent, to 378 pence at 10:07 am in London, the biggest drop in six weeks. The stock slumped to a one-year low of 294 pence on Feb 5, when ICAP cut its profit outlook.
ICAP spokesman Mike Sheard declined to comment.
The collapse in credit markets in 2008 spurred ICAP's customers to increase trading, boosting the amount of business it handles. As markets calmed last year amid unprecedented government efforts, trading in some of ICAP's markets slowed.
"While a number of our cash equities businesses are performing well, the expansion into full service agency cash equities in Europe and Asia has failed to match up to our expectations," Spencer said in today's statement. "After a thorough review we have therefore decided to withdraw from the full service offering."
ICAP expects closing the sales, trading and research operations in Asia and Europe will result in a pretax charge of as much as 51 million pounds ($76 million), the London-based broker said in a statement. ICAP will report operating losses of about 25 million pounds for the discontinued businesses in the year ended March 31 as a separate item.
ICAP invested in new businesses in the past two and a half years to expand beyond its core voice and electronic broking, derivatives and post-trade services. ICAP announced a review of its cash equities operations on Feb 15 after Chief Executive Officer and founder Michael Spencer cut the company's outlook for full-year profit, saying new ventures were taking longer than anticipated to become profitable.
"Today's news may further result in the market questioning the future of ICAP's historically successful acquisition strategy," Vivek Raja, an analyst at Panmure Gordon & Co. in London, wrote in a note to clients.
ICAP has been trying to find a partner or buyer for the unit, and has held talks with State Street Corp, the world's second-biggest money manager for institutions, about cooperating in recent months, said five people close to the matter who declined to be identified because the talks are private.
ICAP fell 12.8 pence, or 3.3 per cent, to 378 pence at 10:07 am in London, the biggest drop in six weeks. The stock slumped to a one-year low of 294 pence on Feb 5, when ICAP cut its profit outlook.
ICAP spokesman Mike Sheard declined to comment.
The collapse in credit markets in 2008 spurred ICAP's customers to increase trading, boosting the amount of business it handles. As markets calmed last year amid unprecedented government efforts, trading in some of ICAP's markets slowed.
"While a number of our cash equities businesses are performing well, the expansion into full service agency cash equities in Europe and Asia has failed to match up to our expectations," Spencer said in today's statement. "After a thorough review we have therefore decided to withdraw from the full service offering."