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Leucadia National (LUK) To Buy Jefferies Group (JEF) For $3.6B

 November 12, 2012 09:30 AM
 


(By Balaseshan) Leucadia National Corp. (NYSE: LUK) said it has agreed to buy the investment banking firm Jefferies Group Inc. (NYSE: JEF) for about $3.6 billion. Following the news, shares of JEF jumped 23.34% and LUK rose 2.06% in premarket.

Jefferies' shareholders (other than Leucadia, which currently owns about 28.6% of the Jefferies outstanding shares) will receive 0.81 of a share of Leucadia common stock for each share of Jefferies common stock they hold.

In order to avert the possibility that the transaction would result in the application of tax law limitations to the use of certain of Leucadia's tax attributes, the merger deal limits the amount of Leucadia shares that can be issued to certain persons that would otherwise become holders of 5% of the combined Leucadia's common shares by reason of the merger.

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The combined company will be well-positioned to capitalize on Leucadia's investment expertise and Jefferies' investment banking and capital markets platform, including opportunities for enhanced growth, diversification and profitability that are expected to result from the combined management structure and increased business interaction.

Following the transaction, 35.3% of Leucadia's common stock will be owned by Jefferies' shareholders (excluding the Jefferies shares owned today by Leucadia and including Jefferies vested restricted stock units).

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Leucadia's Board has approved a new share repurchase program authorizing the repurchase from time to time of up to an aggregate of 25 million Leucadia common shares, inclusive of prior authorizations.

Leucadia's Board also indicated its plan to continue to pay dividends at the annual rate of $0.25 per common share, but on a quarterly basis following the merger.

Leucadia will continue to operate in its current form, except that the merger agreement contemplates that Leucadia's Crimson Wine Group, with a book value of $197 million, will be spun out in a distribution that is intended to be tax-free to current Leucadia shareholders prior to the completion of the merger.

Jefferies, which will be the largest business of Leucadia, will continue to operate as a full-service global investment banking firm in its current form. Jefferies will retain a credit rating that is separate from Leucadia's.

Jefferies' existing long-term debt will remain outstanding and Jefferies intends to remain an SEC reporting company, regularly filing annual, quarterly, and periodic financial reports.

This exchange is intended to be tax-free to Jefferies' shareholders. The merger, which is expected to close during the first quarter of 2013, is subject to customary closing conditions, including approval to effect the merger by both Leucadia and Jefferies shareholders.

LUK closed Friday's regular session at $21.80, while JEF ended at $14.27.

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