Jefferies raises $490 million in stock offering
Jefferies Group Inc
The New York-based investment bank priced 20.6 million shares at $24.25 each, a 3.5 percent discount to its closing price on Wednesday.
Jefferies said late Thursday afternoon that it planned to raise $500 million in the offering. The $490 million in proceeds was net of underwriting fees.
Jefferies also said on Friday that it plans to issue senior notes. The company did not say how much capital it intends to raise through that offering or whether it will retire other existing debt, which some analysts consider expensive.
Jefferies is preparing to purchase a large trading operation from Prudential Financial Inc
. The company said it will pay $430 million for the business, to be called Jefferies Bache, which trades commodities and derivatives on and off exchanges.
After the deal was announced on Thursday, Jefferies shares came under pressure, dropping as much as 2.9 percent and finishing down 1.6 percent at $24.71. The shares were off 0.7 percent at $24.55 Friday morning.
Ticonderoga Securities analyst Douglas Sipkin estimates the equity raise and acquisition will dilute Jefferies shareholders' stakes by 1 percent to 7 percent, depending on the earnings Bache can deliver.
Bache reported pretax earnings of $17 million in 2010 on revenue of $220 million.
Though Sipkin expects Jefferies shares to remain under pressure in the near term, he thinks the equity raise is a good move because it delevers Jefferies' balance sheet and increases book value.
Gimme Credit analyst Kathleen Shanley has pointed out that Jefferies' balance sheet is more leveraged than that of larger rivals such as Goldman Sachs Inc
A Jefferies spokesman contacted by Reuters did not immediately provide more information about the stock and bond offerings.
Jefferies, J.P. Morgan Securities LLC, Natixis Bleichroeder LLC and Citigroup Global Markets Inc were the joint bookrunners for the stock offering, while BNY Mellon Capital Markets LLC and BMO Capital Markets Corp acted as senior co-managers and Rabo Securities USA Inc acted as co-manager.
(Reporting by Lauren Tara LaCapra; Editing by John Wallace, Phil Berlowitz)
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