Jefferies Group Agrees to Acquire Lawrence Helfant
Jefferies Group Inc. agreed Monday to buy New York Stock Exchange specialist firm Lawrence Helfant in a deal that would turn Los Angeles-based Jefferies into the Big Board’s fourth-largest trading firm.
The deal would significantly boost Jefferies’ presence on the NYSE by tripling, to 18, the number of trading seats Jefferies controls. Previously it was not among the 10 largest floor brokers.
Specialists are middlemen who handle trading on stock exchanges. They usually match buyers and sellers for a small fee. However, when there is an imbalance of either buyers or sellers, specialists put up their own money to maintain an orderly trading flow.
Once mom-and-pop operations, consolidation has swept the ranks of specialist firms in recent years. The cost of upgrading to new technology, as well as the need to have sufficient financial muscle in today’s volatile market climate, has forced specialists to bulk up their operations.
The purchase would give Jefferies, known primarily as an institutional trading firm, daily trading volume of more than 100 million shares. The acquisition price was not disclosed.
Jefferies, which was founded in 1962, plans to combine its Big Board trading unit, W&D; Securities Inc., with Helfant and name the new entity Helfant Group Inc. Lawrence Helfant, founder of Helfant, and Paul W. Bodor, president of W&D;, will be co-chairmen of the combined entity.
By expanding its presence on the NYSE, Jefferies would gain greater insight into daily NYSE trading patterns, said Russell Keene, an analyst at Keefe, Bruyette & Woods Inc. in New York.
“They can give clients better information, and because of that they hope clients will do more business with the company,” Keene said.
The deal would benefit Jefferies through various “synergies,” said John C. Shaw, president of Jefferies, including better execution of trades and lower costs from a combined operation with a bigger capital base. The additional traders will be able to relay more information to clients more quickly, Jefferies said.
In this year’s first half, 64% of Jefferies’ revenue came from stock and bond trading, while 14% came from investment banking.
Meanwhile, Jefferies itself might be in play, according to recent reports. The discount brokerage firm Charles Schwab Corp., reeling from the plunge in individual-investor stock trading, has held merger discussions with Jefferies, the Wall Street Journal said last week.
But some industry analysts have called such a union unlikely, and in its news release Monday, Jefferies took steps to assert its independence.
The Helfant purchase “is consistent with our strategy of remaining an independent firm serving mid-cap companies and their investors,” said Richard B. Handler, chief executive of Jefferies. Jefferies’ investment banking business focuses on small and mid-size companies, which it advises on mergers and acquisitions, raising capital, restructuring and other areas.
Jefferies spokesman Tom Tarrant had no comment Monday on whether talks with Schwab are taking place.
The Helfant deal may close by the end of this week, he said, pending approval from the NYSE and the National Assn. of Securities Dealers.
Jefferies’ shares, up 11% this year, fell $1.31 on Monday to close at $34.69 on the NYSE.
