Royal Bank of Scotland Group Plc, Britain’s biggest state-owned lender, is nearing an agreement to sell its Hoare Govett corporate broking unit to Jefferies Group Inc. (JEF), two people with knowledge of the talks said.
The sale, which may be announced by the end of the month, involves about 40 Hoare Govett employees as well as a small number of additional research and equity sales staff, said the people, who declined to be identified because the negotiations are private. Jefferies will pay only a nominal amount for the business and RBS has offered to provide funds to cover some staff costs, the people said.
RBS said on Jan. 12 it will cut about 3,500 jobs at its investment banking division as it sells or closes its unprofitable cash equities, mergers advisory and equity capital markets divisions. The bank decided to exit the units after volatile markets and increasing regulation rendered it impossible to generate returns that beat their cost of equity.
Spokesmen for Jefferies and Edinburgh-based RBS declined to comment. New York-based Jefferies hired former UBS AG Vice Chairman Benjamin Lorello in October 2009 to expand its global investment banking operations as its rivals retreated after the credit crisis of 2008.
Any sale leaves questions unanswered about the fate of the remaining employees whose jobs are being eliminated, said the people. 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.
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 around 70 listed clients including engineering firm Rolls-Royce Holdings Plc and BAE Systems Plc (BA/), Europe’s largest defense group.
By Liam Vaughan and Gavin Finch
Courtesy of Bloomberg News