Icap and Tullett Prebon propose remedies to regulator's concerns

ICAP has proposed selling its London-based oil broking business and issuing its shares in the enlarged Tullett Prebon to remedy concerns raised by the UK competition regulator.

Both companies announced the proposals late on Tuesday after the Competition and Markets Authority (CMA) earlier this month threatened a deeper investigation into Icap's sale of its voice broking business to Tullett, which was approved by shareholders in March and is expected to complete later this year.

ICAP, which will change its name to NEX Group when the deal is done, said it and Tullett were in discussions about offloading its oil broking business "within the appropriate timeframe".

ICAP added that it no longer intends to retain a 19.9% interest in TP-ICAP after completion of the deal and has agreed with Tullett that, subject to regulatory and shareholder approval, it will issue these shares directly to its shareholders.

As a result, NEX shareholders will hold roughly 56% of TP-ICAP's enlarged share capital on completion rather than the previously proposed 36.1%.

Broker Shore Capital welcomed the change of mind "as we had struggled to understand the original logic of retaining a stake in a business that ICAP was strategically exiting as part of its transition to a pure fintech business".

"We estimate [the oil broking desks] account for under £20m of revenue but would point out that oil broking has been a rare bright spot within the recent trading of Tullett Prebon since its well-timed acquisition of PVM in November 2014," analyst Paul McGinnis said, also calculating fair value of the 19.9% stake in TP-ICAP at around 60p of his overall fair value share price estimate.

He added that the new proposals may also help expedite the transaction as it removes one other potential query from regulatory minds.

Shares in Icap down 0.7% to 427.1p on Wednesday morning, while Tullett's spiked initially before retreating to 321.1p, a rise of two pence.