Jefferies to sell stake to Leucadia

Jefferies Group Inc., an investment bank that serves mid-size companies, said Monday that it would sell a 13.7% stake to Leucadia National Corp., raising $434 million of equity capital after its second straight quarterly loss.

Leucadia will buy 26.6 million shares, inject $100 million of cash and take two newly created seats on Jefferies’ board, which now has seven members.

Jefferies joins banks and securities firms including Citigroup Inc., Wachovia Corp. and Washington Mutual Inc. that have sought more than $160 billion to replenish capital in recent months, amid losses stemming from the slump in housing and a global credit crisis.

Jefferies, based in New York, lost $60.5 million, or 43 cents a share, compared with a net income of $62.3 million, or 42 cents, a year earlier. Revenue fell 52% to $201.2 million. Analysts, on average, expected it to earn 12 cents, according to a Bloomberg News survey.

“The first quarter of 2008 was the most brutal environment we have ever seen,” Jefferies Chief Executive Richard Handler said. “The liquidity crisis and panic that has spread around the globe has devastated financial institutions everywhere.”

Jefferies gave $100 million in cash to Leucadia, and will buy 10 million of Leucadia’s shares in exchange for the Jefferies shares. It can sell the Leucadia shares at any time.

Leucadia, a New York holding company that invests in insurance, wine and real estate, has agreed not to sell any of the Jefferies shares for two years without approval of the Jefferies board. The holding company also agreed not to acquire more than 30% of Jefferies’ shares.

Jefferies shareholders’ equity will increase by $433.6 million through the deal. The company also announced it would continue to pay a dividend of 0.125 of a cent a share.

Shares of Jefferies rose 2 cents to $15; Leucadia shares climbed 9 cents to $53.45.