Icap, Reuters sell their stakes in Blackbird

UK inter-dealer broker Icap and information company Reuters have sold their minority stakes in Charlotte, North Carolina-based electronic inter-dealer broker Blackbird. The development effectively ends 18 months of bitter dispute between Icap and Blackbird’s management over control of the company.

Icap sold its 19% holding, which it bought for about $12 million early last year, to Blackbird’s management in exchange for an undisclosed amount of cash and intellectual property rights. Reuters sold its 11.8% stake to an un-named Japanese venture capital firm for less than $1 million.

The Icap deal took place a day before a Blackbird general shareholder meeting due at 5pm EST today, a meeting that was called as a result of a Delaware court ruling. It forestalls an effort by Icap and its chief ally, Blackbird co-founder and ex-chief executive, Ray May, to wrest operating control of the company from Blackbird’s current executives, including Blackbird co-founder and president, Shawn Dorsch, chief executive, Mark Brickell, and chairman, Andy Baxter. Both Icap and Reuters, which had both written off their investment in the company, should now vote in favour of Blackbird’s management.

The deal also ends an ongoing legal wrangle between Blackbird’s management, Icap and May. Icap and Blackbird said in a statement that they had dropped all pending lawsuits against each other in a number of US courts. May was unavailable for immediate comment.

“We are very happy that our capital structure has been simplified and cleansed in this way. It enables us to work with new investors whose interests are aligned with our own and permits us to focus on the needs of our customers,” Blackbird’s Brickell told RiskNews.

Icap also said it was pleased to have resolved its differences, but refused to comment further. RiskNews was told by a number of parties that under the terms of the deal, Icap and Blackbird had agreed not to divulge specific details of the transaction.

But it is unlikely that Icap received much cash for its holding, which had entitled it to a 31% vote on Blackbird’s board, according to one insider. He added that the UK broker probably secured licences and exemptions to protect itself from any future lawsuits related to its use of Blackbird-related technology. Icap, which has been the subject of high-profile media attention due to allegations that it attempted to capitalise on rival Cantor Fitzgerald’s weakness after it lost of hundreds of staff in the World Trade Center attacks last September, almost certainly secured an adverse publicity agreement. Apart from a near media blackout on the matter, this was likely to include a block on the intensive anti-trust lobbying apparently being carried out by Blackbird executives in Washington.

Blackbird now has no large institutional investors with a vested interest in other areas of financial trading. Its management resources will be freed up to develop its own business plans independent of outside interference. “But it will still face an up-hill struggle,” said one insider, referring to the development of large-scale liquidity on its swaps trading platform, which is said to have floundered during the dispute.