Leucadia to Buy Investment Banker Jefferies in $2.6 Billion Deal

Monday, 12 Nov 2012 07:40 AM

 

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Leucadia National is buying the investment banking firm Jefferies Group for about $2.6 billion in stock.

Leucadia is a diversified holding company that has interests in industries such as manufacturing, oil and gas-drilling services and gambling as well as a 28.6 percent stake in Jefferies.

Jefferies will become a Leucadia subsidiary if the deal is approved and will be Leucadia's largest business. It will still operate as a full-service investment banking firm. After the deal closes, 35.3 percent of Leucadia's stock will be owned by Jefferies Group Inc. stockholders.

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As part of the deal, Jefferies Chairman and CEO Richard Handler will become the CEO of Leucadia. Leucadia's Chairman and CEO Ian Cumming will retire but remain on the board. Leucadia President Joseph Steinberg will become chairman.

Jefferies' stockholders will receive 0.81 of a share of Leucadia stock for each share they hold. This doesn't include Leucadia's current 28.6 percent of Jefferies outstanding stock.

The companies' boards have approved the deal. It still needs approval of both companies' shareholders.

Jefferies' shares climbed $2.08, or 14.6 percent, to $16.35 in morning trading.

Leucadia National Corp. announced in April 2011 that it planned to buy $125 million in Jefferies stock as part of Jefferies' $500 million stock offering.

On Monday, Leucadia said it may spin off its Crimson Wine Group before the Jefferies' deal is complete.

Once the transaction closes, Jefferies' four independent directors will join Leucadia's board, which will boost the board's size to 14 members.

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Ratings agencies Moody's Investors Service, Standard & Poor's Rating Services and Fitch Ratings said that they are reviewing Leucadia's ratings for a possible upgrade. Fitch said that if the Jefferies' deal closes and there are no adverse credit developments, it is likely that Leucadia's issuer default rating will go to investment grade status from junk status. Standard & Poor's said that its issuer credit rating for Leucadia may also move from junk to investment grade status.

Shares of Leucadia shed 38 cents to $21.42 in morning trading Monday.

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