LaBranche & Co. Inc. (NYSE: LAB) has been rumored to be making a serious change or sale for some time. Tonight, that was partially confirmed. The company has signed a sale agreement to sell its specialist operations, now called its Designated Market Maker business, to Barclays plc’s (NYSE: BCS) Barclays Capital for some $25 million. It is also purchasing all of LaBranche’s net DMM positions as of the closing date. This is not a 100% exit from all market making operations, just to be clear.
The company said in its release that it will continue its market-making in ETFs, equity options, FX options and futures, both domestically and internationally. The company noted that these have been the majority of market making revenues since 2007.
This is not a total business sale. LaBranche will retain all the cash and its non-DMM assets including its shares in NYSE Euronext (NYSE: NYX). The company also noted that it will no longer have the 76 million net capital requirement tied to market making operations.
As part of the issue, it is redeeming its remaining 11% senior notes due in 2012 in the aggregate principal amount of $189.3 million. The redemption is at the current redemption price of 102.75% plus accrued and unpaid interest. Upon completion of the redemption, the indenture will be terminated and the Company will have no outstanding public debt, resulting in a reduction of the Company’s interest expense by about $21 million per year.
LaBranche is going to further increase its current share repurchase authorization from the about $23.4 million remaining to $100 million. This will dispose of the remaining intangible assets and it will take a $69.7 million non-cash GAAP charge.
The floor operations at NYSE and elsewhere have changed steadily in the last decade. That appears to be continuing today.
JON C. OGG
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