IAP.L Regulatory News (IAP)

21 Apr 2006 07:00

ICAP PLC21 April 2006 ICAP reaches agreement to acquire EBS London, 21 April 2006. ICAP plc (IAP.L) the world's largest interdealer broker,has agreed to acquire all of the share capital of EBS Group Limited (EBS), thepre-eminent provider of foreign exchange trading and market data solutions tothe professional spot foreign exchange community. The agreement is conditionalon regulatory approval. Michael Spencer, Group Chief Executive of ICAP, commented "We are very pleasedto have reached agreement to acquire EBS. The company enjoys a strong marketposition in interdealer spot foreign exchange with a very broad customer base.In addition, we will benefit from EBS's well qualified and experiencedmanagement and staff and we welcome them to ICAP. Our aim is to combine EBS's strengths in electronic spot foreign exchange withICAP's Electronic Broking business to create a single global multi-productplatform with further growth potential and significant economies of scale. Thisplatform will provide customers with more efficient electronic trade execution,reduced integration costs and give access to broad liquidity across a wideproduct range. We have been very clear that our strategy is to grow ICAP's business bothorganically and by selected acquisition. In parallel with the continuingdevelopment of our voice broking business and the development of new markets,this acquisition takes us further towards our goal of offering comprehensiveelectronic execution and post-trade services for liquid, commoditised markets." Jack Jeffery, Chief Executive of EBS, commented "Since its launch in 1993, EBShas established itself as the pre-eminent provider of trading and market datasolutions for the professional FX community. Our leading position today is ademonstration of our commitment to customer service, to technology and toproduct innovation. Our strategy is completely consistent with ICAP's. We firmly believe that theintegration of EBS and ICAP is good for both organisations, good for ourcustomers and good for the market as a whole." The consideration for 100% of the share capital of EBS is US$775 million,payable in cash. EBS shareholders are also being offered: • A partial share alternative whereby EBS shareholders may elect toreceive, in aggregate, up to 36.1 million new ICAP shares in lieu of up to onethird of the cash consideration they would otherwise have been entitled to; and • A mix and match election under which EBS shareholders may receive morethan one third of their cash consideration in new ICAP shares, to the extentthat other EBS shareholders elect to receive less than one third of their cashconsideration in new ICAP shares. Assuming the maximum number of new ICAP shares being offered to EBS shareholdersis taken up, the aggregate consideration would be $825 million, comprisingapproximately $517 million in cash and 36.1 million new ICAP shares (with anaggregate value of $308 million based on the closing price of an ICAP share of477.25 pence on 20 April 2006, the day before the release of this announcement).Any new ICAP shares issued as part of the transaction will be subject to lock-uparrangements for a period of six months. The cash consideration to be paid to EBS shareholders will be financed by acombination of ICAP's internal cash resources and debt. ICAP has an underwrittencommitment for the total amount of required debt finance from JPMorgan ChaseBank, N.A. In 2005, EBS revenue was US$206 million (up 10% on 2004) and operating profitbefore exceptional items and goodwill amortisation was US$37 million. ICAP doesnot believe that these results, which are on a UK GAAP basis, would bematerially different under ICAP's accounting policies, including IFRS. At 31December 2005, the gross assets of EBS were US$220 million (net assets: US$142million) including cash of US$55 million. EBS has budgeted for revenue in 2006to increase to US$227 million and operating profit to increase to US$57 million.During the first 3 months of 2006, EBS operating profit was significantly aheadof budget. ICAP believes that there are at least US$32 million of annual cost synergiesthat can be achieved by 2008/9 through combining EBS with ICAP's ElectronicBroking businesses; these include network infrastructure, IT and property costs.To achieve the synergies, ICAP expects to incur exceptional costs of US$24million in the first two years following the acquisition of EBS. In addition,from April 2006 and going forwards, EBS will no longer be subject to a salescommission charge which in the year ended 31 December 2005 amounted to US$11million and for which there is no outstanding liability. This commission relatedto specific revenue and its cessation is not expected to have a negative impacton future EBS revenue. Following the acquisition, senior management of EBS including both Jack Jeffery,EBS's Chief Executive Officer, and Stephen Caplen, EBS's Head of Finance, willremain with the business within the ICAP Group. The acquisition is expected to be accretive to ICAP's 2006/7 adjusted earningsper share. There will be a briefing for analysts and shareholders at 10:00 am BST on 21April 2006 at 2 Broadgate, London EC2M 7UR. An audiocast of the presentationmade to analysts at 10:00 am BST on 21 April 2006 will be available on the website, www.icap.com at 1:00 pm BST on 21 April 2006. It will remain on the website for six months. Contacts: Michael Spencer Group Chief Executive (44) 20 7050 7400Mike Sheard Director of Corporate Affairs (44) 20 7050 7103Neil Bennett The Maitland Consultancy (44) 20 7379 5151 About EBS Launched in September 1993 by a group of the world's largest foreign exchangemarket making banks, EBS is the pre-eminent provider of foreign exchange tradingand market data solutions to the professional spot foreign exchange community.Approximately US$130 billion in spot foreign exchange, 700,000 ozs gold and7,000,000 ozs silver transactions are conducted over the EBS Spot Dealing Systemin more than 40 countries each day. The EBS shareholders are subsidiaries of the following banks and institutions:ABN AMRO, Bank of America, Barclays, Citigroup, Commerzbank, Credit Suisse FirstBoston, HSBC, JPMorgan Chase, Lehman Brothers, The Royal Bank of Scotland,S-E-Banken, UBS AG and the Minex Corporation of Japan. More information about EBS is available at www.ebs.com Citigroup Global Markets Limited acted as sole financial adviser to the EBSshareholders in relation to this transaction. Slaughter and May acted asprincipal legal adviser to the EBS shareholders. About ICAP: ICAP is the world's largest interdealer broker and following the acquisition ofthe BrokerTec fixed income securities businesses is the world's leadingelectronic broker of fixed income securities with a daily average transactionvolume in excess of $1 trillion, 50% of which is electronic. The Group is activein the wholesale market for OTC derivatives, fixed income securities, moneymarket products, foreign exchange, energy, credit and equity derivatives. Formore information go to www.icap.com JPMorgan Cazenove and Lexicon Partners Limited acted as joint financial advisersto ICAP in relation to this transaction. Macfarlanes acted as principal legaladviser to ICAP. This information is provided by RNS The company news service from the London Stock Exchange