Bloomberg News

RBS Agrees to Sell Hoare Govett Broking Unit to Jefferies

February 01, 2012

(Updates with Jefferies’s statement starting in the second paragraph.)

Feb. 1 (Bloomberg) -- Royal Bank of Scotland Group Plc, Britain’s biggest state-owned lender, agreed to sell its Hoare Govett corporate broking unit to Jefferies Group Inc. as the U.K. lender shrinks after getting a government bailout.

Jefferies will pay a “nominal” amount in cash for the unit, Edinburgh-based RBS said today in a statement. About 50 employees will join Jefferies’s London office, including all of Hoare Govett’s corporate broking team, New York-based Jefferies said in a separate statement.

RBS said in January it will cut about 3,500 jobs at the investment-banking division as the firm sells or closes the unprofitable cash equities, mergers advisory and equity capital markets divisions. Chief Executive Officer Stephen Hester, 51, decided to exit the units after volatile markets and increasing regulation rendered it impossible to generate returns that beat their cost of equity.

The sale will still leave questions unanswered about the fate of the remaining employees whose jobs are being eliminated, people with knowledge of the talks said last month. Lazard Ltd., 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.

“RBS remains in active discussions with other third parties interested in acquiring various parts of the businesses it has identified for exit,” the lender said in the statement.

The sale of Hoare Govett is expected to be completed by the end of March, it said.

Jefferies Expansion

Jefferies hired former UBS AG Vice Chairman Benjamin Lorello in October 2009 to expand its global investment-banking operations as rivals retreated after the financial crisis. CEO Richard Handler, 50, has almost quadrupled the staff since taking charge in 2001, hiring bankers and traders from the world’s biggest investment banks, including Goldman Sachs Group Inc., Citigroup Inc. and Barclays Plc.

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 about 70 listed clients including engineering firm Rolls-Royce Holdings Plc and BAE Systems Plc, Europe’s largest defense group.

“Our absorbing of Hoare Govett provides Jefferies with an exceptional opportunity to continue our growth in corporate broking and significantly expand the capabilities and reach of our established European investment banking and equities businesses,” Handler and Brian P. Friedman, chairman of the Jefferies’s executive committee, said in the statement.

The government owns 82 percent of RBS after injecting 45.5 billion pounds ($72 billion) of public money into the lender at the height of the financial crisis, making it the costliest bailout of any bank in the world.

--With assistance from Liam Vaughan and Gavin Finch in London. Editors: Edward Evans, Peter Eichenbaum

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net; Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net; David Scheer at dscheer@bloomberg.net


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