UK stockbroker to buy Tullett for up to £250 million

Terry Smith, chief executive of Collins Stewart, pushed through the takeover, despite early leaks of talks between the two parties last October. The deal represents an opportunity for Tullett shareholders to realise the value of their investments and offers the potential for Tullett to raise fresh funds to allow it to participate in the rapid consolidation of the over-the-counter (OTC) inter-dealer broking business.

Rival brokers say there is only room for three global inter-dealer brokers. The ability for Tullett to issue shares to fund purchases improves its chances of being one of those three, and there is speculation that the firm may make a move on rival Prebon Yamane.

Tullett initially intended to float on the London bourse in a cash-raising exercise, but its directors favoured the Collins Stewart purchase, given the state of the equity markets.

Tullett chief executive Bruce Collins and chief financial officer Stephen Jack will both sit on the expanded Collins Stewart board, albeit outnumbered by existing Collins Stewart directors. The current Tullett executive committee will remain intact to take care of day-to-day activities.

Collins Stewart estimates operating profits of £32 million for last year. Tullett is expected to achieve a similar level, despite its implied market capitalisation being £100 million less than the stockbroker's as of its closing share price last night. Collins Stewart shares were up by 5% following the takeover announcement today.

Tullett has 1,800 staff in offices in London, New York, Hong Kong, Singapore, Sydney, Frankfurt, Paris and Toronto, and alliances in Tokyo, Bahrain, Bangkok, Mumbai and Latin America. It runs a hybrid voice-broking/ electronic business model and brokers bonds, interest rate swaps, foreign exchange, equities, credit derivatives and energy products.

London-based stockbroker Collins Stewart, which floated in October 2000, also provides corporate finance and fund management services. It also supplies online financial information through its Quest share evaluation service.

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