New era as JP Morgan seals £1bn deal to take over Cazenove

Published on Thursday 19 November 2009 21:18

JP MORGAN confirmed its £1 billion takeover of Cazenove yesterday, as the blue-blooded broker gave details of its extraordinary success throughout the financial crisis.

US investment bank JP Morgan, which has owned half of Cazenove for five years, announced it would pay 1bn for the remaining shares.

It said the deal, which values the UK firm at 2bn, marked a "new era" for the partnership, promising seamless continuity for clients. The move will also spark multi-million pound windfalls for dozens of senior and former staff at Cazenove, whose clients include the Queen.

Confirming details of the deal, Cazenove also spelt out its attraction to JP Morgan. While the financial crisis has seen thousands of staff laid off from City firms as flotations ground to a halt, Cazenove has seen a surge in demand for its services.

As well as being the UK's leading corporate broker, Cazenove has won business from the dozens of companies that have tapped the markets for cash to restore and strengthen balance sheets this year.

It is believed to have taken part in more than 80 per cent of all rights issues and share placements undertaken by companies on the London Stock Exchange in 2009. Fees from the cash calls meant gross revenues at Cazenove were 216.7 million in the nine months to 30 September, more than in all of 2008. Profits after tax in the period were 65.4m, compared with 48.5m in 2008 as a whole.

David Mayhew, who will continue as chairman of Cazenove after the takeover, is thought to be in line to gain about 20m from the deal.

"The agreement we have reached is a natural extension or our relationship," he said. "It builds on what we have achieved in the past five years and provides a platform for the next stage of development."

Chief executive Naguib Kheraj will stay on with the group to oversee its integration into JP Morgan, and is then expected to take up a new role within the group.

Kheraj said the business would be "fundamentally unchanged" with the same people offering the same approach to business.

Cazenove's shareholders will receive 510p a share when the sale is completed, and a further 25p a share in dividend payments next month.

More than 90 per cent of its shares are owned by its current and former staff, with institutional investors holding the remaining equity.