Tullett Prebon in first LatAm move with Brazil purchase

FT.com / FT Trading Room: "

By Jeremy Grant in London

Published: October 13 2009 14:49 | Last updated: October 13 2009 14:49

Tullett Prebon on Tuesday became the latest British inter-dealer broker to highlight growing interest in the Brazilian capital markets by saying it would buy Convenção Corretora de Valores e Câmbio, a leading Brazilian inter-dealer broker, for an initial cash payment of R$20m (£7.3m).

The increasing significance of Brazil for international investors has acted as a magnet on the world’s inter-dealer brokers – brokerages that specialise in trades between big market dealers rather than individuals, typically operating with large volumes at low margins.

Tullett’s move also will give it a physical presence in Latin America for the first time.

It comes four months after rival BGC Partners completed the purchase of Liquidez, another Brazilian inter-dealer broker. In November last year, Icap bought Arkhe, an independent Brazilian broker it had dealt with for several years

Convenção was founded in 1973 by Eduardo da Rocha Azevedo, a former president of the Bovespa stock exchange, now part of BM&F Bovespa, the Brazilian stock and derivatives exchange.

The Brazilian firm is being sold by Mr Azevedo, Eduardo Nogueira da Rocha Azevedo, and Marcelo Taiar Arbex. The senior management of Convenção will remain with the company after the acquisition is completed, Tullett Prebon said.

In addition to the initial purchase price, Tullett Prebon has also agreed to pay “deferred consideration” of up to a maximum of R$30.3m (£11m), payable in cash “subject to achievement of future revenue and profit targets”.

For the year to December last year, Convenção reported revenues of R$21.9m (£8m).

Tullett Prebon said it planned to establish a presence “in key countries throughout the Latin American region commensurate with its position as one of the world’s leading inter-dealer brokers”.

The acquisition was conditional on approval from the Brazilian authorities, including the central bank, and was expected to complete in the second quarter of 2010.

Terry Smith, chief executive of Tullett Prebon, told the FT recently that the inter-dealer broking business had been “going onshore” in recent years, to places like Brazil, rather than automatically being done in the biggest financial centres in the northern hemisphere.

”If you’d gone back five years you would have found that the vast majority of [Brazil-related] business was conducted via New York. Increasingly it’s being done by brokers operating out of São Paulo. Some of those brokers have developed in to very credible operations; it’s by no means the wild west there.”"