Close Brothers fends off consortium

Another unsolicited, unwelcome bid by a banking consortium for a rival. So the world really has changed forever since the ABN AMRO deal – at least in scaled down version.

Close Brothers, the £1.4bn investment bank which describes itself in old school fashion as “an independent merchant bank”, has already rejected the 950p per share cash offer from a consortium of Cenkos Securities and Landsbanki, an offer that was confirmed this morning, 8 November.

“Wholly inadequate,” is how the Board of Close Brothers has described the offer, adding that it does not propose to pursue discussions with the consortium. Despite which, Close’s share price has pursued its own independent path upwards in favour of the offer price, to at least 921p a share, in a rise of over 21% on 8 November.

Close Brothers has found itself caught up in a hotly predicted game of sector consolidation amongst mid-cap brokers. When Icelandic investment bank Landsbanki agreed to buy AIM-listed investment bank and stockbroker Bridgewell Group in May 2007, adding to its earlier 2005 purchase of UK small and mid cap broker ‘Teathers’ (Teather & Greenwood), the Icelandics stated their plan to be ‘well-positioned to benefit from the further consolidation expected in this sector.’

Up against Landsbanki, as rival sector consolidators, has been the other Icelandic bank Kaupthing, which has already bought £500m+, 100 year old UK stockbroker Singer & Friedlander, and which was also in the running for Teathers.

Cenkos, meanwhile, is the ambitious new stockbroker established by Andy Stewart in 2005 and floated on AIM in October 2006, since when it has been involved in speculation both as a target and an acquirer. He is the very Stewart who gives his name to Collins Stewart, the stockbroker which he co-found with Mr Collins in 1991 and which bought £150m independent corporate finance house Hawkpoint Partners in 2006.

Cenkos, which is about a tenth of the size of Close Brothers by market capitalisation, has stated that it only wants the investment banking and asset management businesses of Close Brothers, while the banking division will be acquired by Landsbanki.

The Cenkos/Landsbanki consortium approach to Close Brothers may not be of the same scale as the cash-rich €71.1bn (US$99.9bn) offer by RBS, Santander and Fortis for ABN AMRO, but it shares similar characteristics: an under-valued conglomerate of various financial services subjected to an unsolicited break-up bid by a consortium of banking rivals.