By Angela Chen
Jefferies Group LLC has agreed to sell its Bache commodities and
financial derivatives unit to Société Générale SA, while bulking up
in foreign exchange by buying Faros Trading LLC, a unit of FXCM
Inc.
Financial terms of the deals weren't disclosed.
The investment bank said in December that it was considering
strategic options for the Bache business, which it bought from
Prudential Financial Inc. in 2011. Meanwhile, Jefferies parent
Leucadia National Corp. offered a rescue package to FXCM earlier
this year after the brokerage suffered steep client losses due to
volatility in the currency markets.
Jefferies bought the Bache unit--one of the most storied names
on Wall Street--in mid-2011 as the firm sought to grow from a
securities-industry boutique focused on stock trading into a
full-service investment bank that helps clients raise money and
trade stocks, bonds and derivatives, where investors and big
industry players transfer the risks of future price movements.
The New York securities firm said in December that the business
has faced growth and margin challenges, and the firm was in talks
with third parties about a potential combination with a similar
business to improve its competitive standing.
Meanwhile, Fred Orlan, Jefferies' global head of fixed income,
said the deal to buy FXCM's institutional foreign exchange
brokerage is part of an effort to expand its capabilities in that
market, especially in light of the recent currency volatility.
Faros Chief Executive Ray Kamrath will become global head of
foreign exchange at Jefferies where its existing foreign exchange
business and Faros will operate as a single team.
The deal, which is seen closing in the second quarter, will lead
to $66 million in one-time costs, and exiting the business is
expected to add to Jefferies' earnings in the future.
Earlier this year, Leucadia offered FXCM a $300 million rescue
package after a surprise surge in the Swiss franc led to big client
losses following the decision by the Swiss National Bank to
eliminate the cap on the currency. The company said in February
that it has begun to receive payments from FXCM and expects to
recover more than a quarter of its investment within three months
of the deal's closing.
FXCM, for its part, has been selling off noncore assets as it
looks to repay its debt.
Leucadia purchased Jefferies two years ago and in January agreed
to pay $70 million to former shareholders to settle claims it
underpaid when it bought the investment bank.
Shares of FXCM were up less than 1% in premarket trading, while
Leucadia was inactive.
Write to Angela Chen at angela.chen@dowjones.com
Access Investor Kit for Société Générale SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000130809
Access Investor Kit for FXCM, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3026931069
Access Investor Kit for Leucadia National Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5272881047
Access Investor Kit for Prudential Financial, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7443201022
Access Investor Kit for Société Générale SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US83364L1098