Market Overview

Leucadia National Shares Tumble After Purchase of Jefferies

Leucadia National Shares Tumble After Purchase of Jefferies

Shares of investment bank Jefferies (NYSE: JEF) rallied strongly higher on Monday, up over 15 percent at one point, after Leucadia National (NYSE: LUK) purchased the company for about $2.76 billion. Shares of Leucadia initially opened higher, but traded lower shortly after the open -- traders may have become concerned about the deal.

Interestingly, as part of the deal, the current CEO of Jefferies -- Richard Handler -- will take over as the CEO of Leucadia. Ian Cumming, CEO of Leucadia, will retire from the role, but remain on the company's board.

Leucadia is no stranger to Jefferies.

Leucadia is a holding company with diversified business interests. Prior to the acquisition, Leucadia held nearly a third of Jefferies' stock.

Last fall, there were some concerns raised about Jefferies' finances. Just weeks earlier, MF Global had gone under due to its large exposure to European debt. At the time, it was thought that Jefferies might befall a similar fate. That speculation, coupled with a sharp decline in the price of Jefferies' shares, lead to the bank issuing a number of press releases detailing its European debt exposure. As shares of Jefferies set new lows, Leucadia was likewise negatively affected.

According to the companies, the transaction shouldn't change much. Leucadia said that it will continue to pay its $0.25 dividend on a quarterly basis.

For its part, Jefferies said that the deal allows the bank to “play offense,” helping it to raise capital. Handler stated that he thought Jefferies would remain a part of Leucadia for a long time, and that Leucadia shareholders will see upside due to the deal.

The acquisition of an investment bank by Leucadia comes at an interesting time for the industry. Banking giant UBS (NYSE: UBS) announced massive layoffs back in October, as demand for its services has declined.

Shares of Leucadia traded near $20.80 early Monday, down over 4.50 percent. Jefferies shares traded around $16.00, up over 12 percent.

Posted-In: Ian Cumming Richard HandlerNews M&A Intraday Update Movers Best of Benzinga

 

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