Jefferies Group Inc. agreed to be acquired by its biggest shareholder, Leucadia National Corp., in a $2.8 billion deal the companies said would make the investment bank better able to weather market turmoil.
Investors will get 0.81 Leucadia share for each Jefferies share they own, minus 81 cents a share for the spinoff of a wine business, the companies said today in a presentation. That gives Jefferies investors $17.01 for each of their shares, valuing the entire firm at $3.78 billion, according to the presentation.
Leucadia, which already holds about 28.6 percent of New York-based Jefferies, boosted its stake in November 2011 as Jefferies’s stock slid during Europe’s sovereign-debt crisis. The combined company, to be led by Jefferies Chief Executive Officer Richard Handler, will help the investment bank guard against “market dislocations,” the firms said.
“For Jefferies, the deal may allow them to grow and invest without market pressures in the short term,” said Christopher Wheeler, an analyst at Mediobanca SpA in London.
Excluding the spinoff of the wine company, the deal values the entire company at $3.59 billion, based on the 203.1 million shares outstanding as of the firm’s Aug. 31 10-Q filing.
Including the divestiture, the value is about 19 percent higher than Jefferies’s closing price on the New York Stock Exchange on Nov. 9. Jefferies climbed 3.8 percent this year through Nov. 9, after dropping 48 percent in 2011. The stock advanced 12 percent to $15.98 at 12 p.m., while Leucadia fell 4.6 percent to $20.80.
Jefferies management will run the combined company, according to a statement today from the companies.
Handler, 51, will remain CEO of Jefferies after the transaction with New York-based Leucadia is completed in the first quarter, the companies said. Brian Friedman, chairman of Jefferies’s executive committee, will become president of Leucadia, an investment firm with stakes in beef processors, mining companies and auto retail. Leucadia shares have declined 4.1 percent this year through Nov. 9.
The transaction values Handler’s stake, the third largest in the company, at about $260 million excluding the wine-company spinoff, according to data compiled by Bloomberg. It was worth $210 million on Nov. 9, the data show.
“We were surprised by the announcement of the deal as we did not view JEF as a likely seller given its substantial growth over the past five years,” Joel Jeffrey, an analyst with KBW Inc., said today in a note, referring to the company by its stock ticker. “That said, given the firm’s constraints on balance-sheet leverage, we struggled to model significant earnings growth that would result in return on equities in the high teens.”