UK broker Collins Stewart Tullett (CST) is boosting its market share in credit derivatives in North America with the acquisition of New York broker Chapdelaine Corporate Scurities for $95 million in cash.
It says it would combine the company with Tullett Prebon when the two parts of Collins Stewart Tullett demerge in December to form an inter-broking business and a stockbroking business.
Of the consideration, $57 million is payable upon completion and $38 million is payable over the next three years, subject to the business meeting certain performance targets, and with lock-in arrangements to prevent the defection of key staff.
While Chapdelaine’s profit margins were now about 10%, they would increase to match the 18% earned by CST, according to Terry Smith, chief executive. Quoted in the FT, he says the deal would give CST $118 million in extra annual revenue and deliver over 20% return on capital employed.
The deal will give Collins Stewart Tullett a 20% share of the credit default swap market in the US, placing it second behind GFI, which has 26%, and moving Icap to third position with 17%, based on market share calculated by Icap in June.