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Categorized | Financial

Gulf bank raises stakes in Plus contest

Posted on May 31, 2012

A bidding war has emerged over Plus Stock Exchange, after Gulf Merchant Bank of Dubai said it would seek to derail the sale of the UK’s ailing third-tier market to Icap, the FTSE 100 interdealer broker.

GMB declined to disclose the terms of its offer on Thursday but said it was “substantially in excess of that announced by Icap”.

    People close to Plus and Icap reacted with surprise to the announcement. They said Plus’s board had entered an exclusive agreement with Icap, meaning it could enter into talks with another group only if shareholders rejected that bid.

    A circular issued to Plus shareholders on Thursday said that the exchange would be wound up if the Icap takeover were to break down.

    Plus Markets Group, the parent company of Plus SX, put itself up for sale in February after a string of annual losses but said two weeks ago that it expected to close after failing to find a buyer. However, two days later Icap said it would buy the exchange for a nominal sum in a deal that would allow the cash remaining in Plus Markets Group to be returned to shareholders.

    GMB was in talks on a purchase of Plus until last month but walked away when it could not secure irrevocable undertakings of support for its bid from shareholders, said a person close to the matter.

    The acquisition of Plus SX would give Icap its licence as a recognised investment exchange, saving it the time and expense of applying for a licence of its own. The licence would enable Icap to comply with the regulators’ drive to force over-the-counter derivatives, one of its core broking segments, on to exchanges.

    However, a person close to Icap said the acquisition was “not a big strategic deal” for the company. “No one should expect Icap to turn itself inside out for this one”. The person questioned whether the Financial Services Authority would agree to a takeover of Plus SX by GMB.

    However, GMB said it had “remained in close contact with the FSA throughout this process … and at no stage has the FSA indicated that it has any difficulty with GMB being a potential acquirer of the recognised investment exchange licence currently held by [Plus SX]”.

    Both Icap and GMB have signalled their intention to keep Plus SX as a market for smaller UK companies. However, the possibility of the agreement with Icap breaking down amid the bidding war means renewed uncertainty for about 150 companies that remain quoted on the index

    Plus, Icap and the FSA declined to comment.