JP Morgan on the verge of acquiring Cazenove

Author: By James Thompson

JP Morgan, which bought 50 per cent of 186-year-old Cazenove in 2004, has until February to exercise an option to buy out its investment banking partner under the joint venture’s terms, but negotiations are thought to be at an advanced stage and a deal could be concluded as early as this week.

It is understood that Cazenove’s 1,500 shareholders, including the blue-blooded broker’s former partners, will share a payout of up to £1bn. David Mayhew, the chairman of Cazenove, is reported to be in line to receive up to £20m from the sale. JP Morgan and Cazenove declined to comment yesterday.

Founded in 1823 by Philip Cazenove as a partnership, the business became a company in 2001, transferring ownership to individuals. Since the joint venture was established in 2004, JP Morgan Cazenove has become a powerful player in investment banking. It has enjoyed a bumper year in 2009 after advising on many large rights issues, including the cash calls of HSBC, Rio Tinto and currently Lloyds Banking Group. JP Morgan Cazenove made pre-tax profits of £134.5m in the year to 31 December 2008, but this year’s figure is expected to be much higher. Current employees own nearly half of Cazenove’s shares, institutions account for 9 per cent and former staff hold the remainder.

Former Cazenove high-flyers, including Henry Henderson, Nigel Rowe and Christopher Smith, could each pocket about £15m. Robert Pickering, who left as chief executive a year ago, could be in line for about £18m. A share price of 525p would value the joint venture’s 50 per cent stake at £988m.

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