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Blackstone enters pole position in Close bidding

The US investment firm is the most prominent interested party in the bidding for UK investment bank Close Brothers and it is reportedly lining up a quick sale of the bank’s assets upon acquisition.

US investment firm The Blackstone Group is interested in bidding for Close Brothers, as its main rival bidder Cenkos Securities, the UK broker, walked away from talks to acquire the investment bank for £1.5 billion ($2.9 billion; €2 billion), according to a source close to the bid.

Cenkos’ partner Icelandic bank Landsbanki remains open to bidding for Close Brothers banking division should another bid step in, according to a City source. Due to the failed bid it will have to do so in partnership with another bidder within the next six months due to the City takeover code, according to a statement by the Icelandic bank.

Should it complete, Blackstone is planning to sell Close Brothers’ Winterflood Securities to Collins Stewart, the London stockbroker, according to UK newspaper Financial Times. It may also sell the banking division to Landsbanki, the FT said.

A source close to Cenkos said it left the bidding for Close Brothers because of obstructions such as a large break fee and the investment bank’s unwillingness to enter exclusivity with the broker.

A Close Brothers spokesman said: “The suggestion that the management of Close Brothers was somehow unco-operative or obstructive could not be further from the truth: we bent over backwards to give Cenkos the chance of substantiating their offer… Neither the equity nor the debt finance had been committed and they required at least five weeks to get this in place.”

Someone close to the sale said Close Brothers had been prepared to pay a £1 million per week fee to Cenkos during due diligence, but to do so it wanted stronger proof of the brokerage’s financing given current market conditions.

Cenkos denies that it did not have its financing in place.

The source close to Cenkos said the brokerage had lined up an investment bank with an AAA credit rating and several institutional investors to support its bid. The bid would have been structured with Landsbanki taking between one third and half of Close Brothers and Cenkos acquiring the remainder of the bank using a mix of equity and debt.

Close Brothers said in a statement it remained in discussions with several bidders. The investment bank’s shares dived yesterday following the end of the Cenkos talks. The shares were 21.2 percent down on last week at £7.56 per share at 13:43GMT today giving it a market capitalisation of £1.1 billion well below Cenkos’ offer price.