Tullett Prebon gets approval for Brazilian deal

Tullett Prebon’s much-delayed push into the Brazilian market is set to press ahead after the UK inter-dealer broker secured regulatory approval for its acquisition of São Paulo’s Convenção Corretora de Valores e Câmbio.

The sign-off by Dilma Rousseff, Brazil’s president will allow the deal, worth up to R$50m and first agreed in October 2009, to finally be completed. It will also enable Tullett to attack a fast-growing market where rivals such as Icap and BGC Partners have taken an early lead.

“With this acquisition, we can now expand Tullett Prebon’s customer base by offering Brazilian clients access to global products and services, and at the same time, provide global clients elsewhere with access to local Brazilian markets,” said Steph Duckworth, chief operating officer of Tullett Prebon.

Tullett also confirmed that the terms of the acquisition for Convenção, which trades commodities, interest rate swaps, futures and options, still stood even though the Brazilian group had expanded from 22 brokers to 35 brokers.

The UK group agreed to buy Convenção for an initial cash payment of R$20m, with a “deferred consideration” of up to R$30.3m based on it hitting future earnings targets. For the year to December 2008 Convencao reported revenues of R$21.9m. The deal, which was first expected to complete in the second quarter of 2010, will now complete in August.

The acquisition will allow Tullett to compete in Brazil, which has attracted the world’s interdealer brokers in recent years as investors seek to trade more derivatives and other complex financial products. Tullett’s UK rival ICAP, which bought local broker Arkhe in 2009, has over 250 employees while BGC Partners bought Liquidez in 2008.

“Tullett are pretty behind. Icap and others have been there for a while. The impression we have is that Icap is heavy on the ground and scaling up. The first movers always have an advantage in these situations,” said Keith Baird, an analyst at Oriel Securities. “But Brazil is a big potential market, so there is room for everybody. But its questionable if they will be the leader in Brazil.”

Convenção’s existing management Eduardo Azevedo and Marcelo Arbex will remain with Tullett Prebon after the deal closes.

Prebon shares closed down 2p at 367p.