RBS Agrees to Sell Hoare Govett Broking Unit to Jefferies
Andy Rain/EPA/Landov
The RBS (Royal Bank of Scotland) headquarters in London on Jan. 27, 2012.
The RBS (Royal Bank of Scotland) headquarters in London on Jan. 27, 2012. Photographer: Andy Rain/EPA/Landov
Royal Bank of Scotland Group Plc,
Britain’s biggest state-owned lender, agreed to sell its Hoare
Govett corporate broking unit to Jefferies Group Inc. (JEF) as the
U.K. lender shrinks after getting a government bailout.
Jefferies will pay a “nominal” amount in cash for the
unit, Edinburgh-based RBS said today in a statement. About 50
employees will join Jefferies’s London office, including all of
Hoare Govett’s corporate broking team, New York-based Jefferies
said in a separate statement.
RBS said in January it will cut about 3,500 jobs at the
investment-banking division as the firm sells or closes the
unprofitable cash equities, mergers advisory and equity capital
markets divisions. Chief Executive Officer Stephen Hester, 51,
decided to exit the units after volatile markets and increasing
regulation rendered it impossible to generate returns that beat
their cost of equity.
The sale will still leave questions unanswered about the
fate of the remaining employees whose jobs are being eliminated,
people with knowledge of the talks said last month. Lazard Ltd. (LAZ),
which is advising RBS on scaling back its investment bank, has
been given until Feb. 23, when RBS reports year-end results, to
find buyers for the remaining businesses, which include the cash
equities operations and units in Asia-Pacific and Australia,
executives at the lender said on Jan. 16.
“RBS remains in active discussions with other third
parties interested in acquiring various parts of the businesses
it has identified for exit,” the lender said in the statement.
The sale of Hoare Govett is expected to be completed by the
end of March, it said.
Jefferies Expansion
Jefferies hired former UBS AG Vice Chairman Benjamin Lorello in October 2009 to expand its global investment-banking
operations as rivals retreated after the financial crisis. CEO
Richard Handler, 50, has almost quadrupled the staff since
taking charge in 2001, hiring bankers and traders from the
world’s biggest investment banks, including Goldman Sachs Group
Inc. (GS), Citigroup Inc. and Barclays Plc.
Corporate brokers, unique to the London market, are hired
by companies to liaise with shareholders. In return, they are
usually hired by their clients to advise on stock offerings and
mergers. Hoare Govett has about 70 listed clients including
engineering firm Rolls-Royce Holdings Plc and BAE Systems Plc (BA/),
Europe’s largest defense group.
“Our absorbing of Hoare Govett provides Jefferies with an
exceptional opportunity to continue our growth in corporate
broking and significantly expand the capabilities and reach of
our established European investment banking and equities
businesses,” Handler and Brian P. Friedman, chairman of the
Jefferies’s executive committee, said in the statement.
The government owns 82 percent of RBS after injecting 45.5
billion pounds ($72 billion) of public money into the lender at
the height of the financial crisis, making it the costliest
bailout of any bank in the world.
To contact the reporter on this story:
Gavin Finch in London at
gfinch@bloomberg.net;
Laura Marcinek in New York at
lmarcinek3@bloomberg.net
To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net;
David Scheer at dscheer@bloomberg.net