NEW YORK CITY-Jefferies Group’s acquisition Monday by Leucadia brings together two major financial firms with significant real estate business. Jeffries will operate as Leucadia’s largest operating company following the deal’s close in early 2013. It will continue to operate as a full-service global investment-banking firm in its current form. Leucadia, which already held a 28.6 percent stake in Jeffries, is acquiring the firm for about $2.6 billion in stock.
The two firms have had a working relationship for more than 20 years. They have partnered on many financings and strategic transactions. Combined, the two firms have total assets of $42.1 billion and total shareholder equity of $9.3 billion.
Jefferies’ investment banking arm is involved in a long list in industries including a category it describes as Real Estate, Gaming and Lodging. In July 2010, it formed a new Real Estate & Lodging Group and describes its services as offering clients in-depth global coverage of REITs, REOCs, lodging companies and real estate private equity sponsors.
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Leucadia’s real estate holdings include the former Panama City-Bay County International Airport in Florida. Leucadia closed on that deal in January and plans to redevelop the property into residential units and commercial space. Leucadia also owns more than 30% of HomeFed Corp., a California residential real estate developer. Additional real estate holdings are in Myrtle Beach, SC and Maine.
Leucadia owns the air rights above the train tracks behind Union Station in Washington, DC and has plans for future projects there. Leucadia’s other subsidiaries include National Beef, the fourth largest beef processor in the US; Inmet Mining, which is involved in global exploration and has a copper mine under way in Panama; Berkadia, the commercial-mortgage servicing firm; and Garcadia, which acquires and operates auto dealerships. Garcadia currently has operations in Iowa, Texas and California.
Leucadia also owns Linkem, a start-up wireless broadband-services provider in Italy, and Idaho Timber, a wood-product manufacturer and distributor. Leucadia plans to sell its Crimson Wine Group, which has a book value of $197 million.
Jefferies says it has grown its market share since 2008 by taking advantage of market dislocation and the “ongoing struggles of our competitors’ to enter new businesses and regions. The company says it has remained “solidly profitable” since 2009 despite a volatile trading environment.
When the merger closes, Richard Handler will become the CEO of Leucadia and one of its directors. He will also remain Jefferies’ CEO and chairman.
Brian Friedman, who has been chairman of the executive committee of Jefferies and one of its directors, will become Leucadia’s president and a director. “It will be business as usual as we serve clients and customers,” Handler said during a Monday morning conference call. “We plan to remain entrepreneurial and nimble.”
Friedman says Leucadia will continue to acquire companies and investments. “These are two companies of strength that look to build value together,” he said.