Jeffries Group, the investment bank subsidiary owned by Leucadia Financial, is undergoing a business shakeup as it is exiting the derivatives brokerage business, by selling portions of its Bache futures unit to Societe Generale (SocGen). The exit occurs as simultaneously, Jeffries made a decision to boost its foreign exchange unit with the acquisition of Faros Trading from FXCM.
Acquired in 2011 from Prudential Securities for around $430 million, Bache has been a poor performer for Jeffries. The firm had announced in December 2014 that it had been seeking ‘strategic alternatives’ to dispose of Bache. The announcement followed news Jeffries was taking a $52 million impairment to goodwill due to its Bache business. Disposing of Bache, Jeffries announced that it expects to absorb a one-time expense of $66 million related to winding down the futures brokerage business. Expected to be completed at the end of Q2 2015, the deal composes the majority of Bache’s business, with Jeffrey retaining select assets.
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For SocGen, Bache adds clients to their multi-asset trading business. After acquiring NewEdge in 2014 and absorbing it into their prime brokerage and trading services, SocGen has been marketing cross-asset brokerage services using NewEdge technology. Among areas of focus are asset managers and smaller multi-asset brokers, who are able to use the NewEdge platform to source liquidity from numerous trading markets using one solutions. Aiming to fit a niche of multi-asset traders, NewEdge allows for customers to aggregate margin across multiple assets, rather than requiring individual credit arrangements per asset type.
“Transferred clients will benefit from the bank’s full suite of innovative solutions” David Escoffier
Commenting about the acquisition, David Escoffier, Deputy Head of Global Markets for Societe Generale Corporate & Investment Banking and CEO at Newedge stated in the firm’s public statement that “This transfer is a good opportunity which allows us to cement our leadership in the rapidly growing sector of listed and OTC derivatives clearing and execution, and post-trade services whilst continuing to position ourselves favourably in the new regulatory environment. Transferred clients will benefit from the bank’s full suite of innovative solutions. All our teams are already mobilized and thrilled to welcome those new clients and facilitate their transition to our high quality service platform”.