Leucadia to buy Jefferies in $2.8 billion deal

Mon Nov 12, 2012 6:16pm EST
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By Jed Horowitz and David Henry

(Reuters) - Jefferies Group Inc JEF.N is selling itself to Leucadia National Corp (LUK.N: Quote), its biggest shareholder, in a deal aimed at reassuring investors it has access to long-term funding.

Leucadia, which models itself on Warren Buffett's Berkshire Hathaway (BRKa.N: Quote) and owns companies ranging from real estate to mining, is paying $2.76 billion in stock for the 71 percent stake of Jefferies it does not own.

The deal is the latest sign that Wall Street firms are scurrying to answer investor questions about their funding and long-term profitability in the wake of new rules and regulations.

Leucadia had previously purchased one million shares of Jefferies in November 2011 to calm market fears about the firm's viability during the European banking crisis and in the aftermath of the bankruptcy of MF Global.

The plan announced Monday values the combined company at $3.6 billion. Jefferies shareholders will receive 0.81 of a Leucadia share, valuing their stock at $17.66 per share, a premium of 24 percent to its Friday closing price of $14.27.

Jefferies shares were up 13.1 percent to $16.41 in late afternoon trading on the New York Stock Exchange. Leucadia was off 3.7 percent at $20.90.

Jefferies will become Leucadia's biggest holding and provide it with a new management team. Jefferies Chief Executive Richard Handler, who is 51, will take the reins of the combined company from Leucadia Chairman and CEO Ian Cumming, who is 71. Leucadia President Joe Steinberg, 68 will become chairman when Cumming retires in January. <For more on Leucadia, click on ID:nL1E8MC2JU>

"This will allow us to play offense at Jefferies," Handler said on a conference call with investors. "It will allow Leucadia a way to invest its excess liquidity."   Continued...