UK-based interdealer broker Icap has signed an agreement to acquire equity derivatives outfit Link Asset and Securities for a total consideration of £250 million.
Icap says it will pay an initial consideration of £135 million. A further payment of up to £30 million will be made based on the amount by which Link's net assets exceed its regulatory capital requirement.
In 2010 Icap will pay an additional amount, equal to 25% of nine times the profit after tax for that year. The total value of the deal is capped at £250 million.
UK-based Link has 136 staff working from offices in London, New York and Hong Kong servicing over 500 customers. The firm posted a 68% jump in revenue, to £81 million, and pre-tax profits of £22 million for the financial year ending December 2007, says Icap.
All of Link's senior management and staff, including co-founders, CEO Charles Davies and chairman John Booth will remain with the business.
Commenting on the acquisition Icap CEO Michael Spencer says equity derivatives are one of the broker's "focus" areas for voice trading because they present "faster structural growth opportunities".
"The market has expanded hugely during the past 5-7 years as a result of the search for yield, the demand for absolute returns and the emergence of volatility as a traded asset class in its own right," Says Spencer "This is an important further step in building our overall capability in the equity markets."
Icap has been boosted by recent market volatility and in a trading update last month said it expects full year pre-tax profits to be above analysts' forecasts.
Spencer says the Link deal is part of an on-going strategy "to grow Icap's business both organically and by selected acquisition".
The broker says it expects the Link acquisition to be accretive to 2008/9 adjusted earnings per share.