NEW YORK - LaBranche & Co Inc said on Wednesday it agreed to sell its New York Stock Exchange specialist business to Barclays Plc for $25 million in cash, reflecting the difficulties standalone market makers face in a shrinking industry.

The sale will free up capital for LaBranche and help it pay down debt. LaBranche will continue to buy and sell derivatives and other instruments in the United States and elsewhere, and provide brokerage services. The company's shares soared 37 percent in after-hours trade to $3.81.

In 2001, LaBranche shares were worth more than $50. But the company's stock price sagged this decade as floor specialists -- traders that bought and sold shares on exchange floors to keep markets flowing -- saw most of their business absorbed by sophisticated computers.

Barclays, meanwhile, will add LaBranche to the other U.S. specialist businesses it has bought in recent years, solidifying its position as top NYSE market maker measured by the number of stocks in its portfolio.

The sale frees LaBranche from $76 million in capital requirements related to the specialist operation, in which the firm is responsible for the dwindling number of orders still matched on the floor. The sale will also help LaBranche redeem nearly $190 million of debt maturing in 2012.

LaBranche said it will retain its NYSE Euronext shares.

The company said it now expects to report an after-tax loss of about $72.5 million, or $1.38 per share, for the fourth quarter, in large part because the Barclays sale will force it to write down intangible assets on its books. It expects to report earnings of 7 cents per share in the quarter ignoring the sale when it posts results on January 20.

The company's shares jumped $1.03 to $3.81 after the close of markets, their highest point since September. The sale of the specialist business, now called its NYSE Designated Market Maker, is expected to close by the end of the month.

LaBranche's market making business covers about 700 NYSE-listed securities while Barclays was already responsible for about 900, the UK-based bank said in a separate statement.

Barclays acquired the rights of Bear Wagner Specialists in March. The bank in 2008 acquired the U.S. operations of Lehman Brothers, which a year earlier had bought the assets of Dutch specialist market maker Van der Moolen.

Barclays purchased all of LaBranche's specialist positions as part of the deal. Big Board parent NYSE Euronext, which plans a floor renovation, said separately it will work with Barclays to reallocate stocks in its portfolio.

LaBranche said it plans to increase its share repurchase authorization from $23.4 million to $100 million.

(Reporting by Jonathan Spicer; Editing Andrew Hay)

NYSE Euronext Investment Lehman brothers Barclays