(Updates with additional comments, details throughout.)
By Jacob Bunge and Jay Miller
DOW JONES NEWSWIRES
LaBranche & Co. (LAB) agreed to sell its New York Stock
Exchange designated market-maker business to Barclays Capital for
$25 million Wednesday, marking the end of an era for the storied
specialist firm.
The move, meant to boost LaBranche's financial flexibility,
brings a $72.5 million loss to the 119-year-old firm and further
shrinks the ranks of so-called designated market makers at the
NYSE, where LaBranche has been one of the biggest firms on the
floor.
"It's definitely the end of an era," said a veteran NYSE floor
broker, speaking on condition of anonymity.
The sale leaves LaBranche with market-making businesses in
options and exchange-traded funds in the U.S. and elsewhere, along
with an institutional brokerage operation, which have constituted
the majority of LaBranche's business for the last two years,
according to the company.
The deal further swells Barclays' presence on the NYSE floor,
following the firm's previous purchases of Bear Wagner Specialists
LLC and Lehman Bros., which included the banking firm's designated
market-maker business.
"This transaction underscores our commitment to our DMM business
and to promoting competitive and transparent public markets," said
William White, head of Barclays Capital Market Makers, in a
statement.
With the deal, the specialist business continues to shrink. From
35 firms a decade ago, there now will be only four--Barclays, Bank
of America Corp. (BAC), Kellogg Group and Goldman Sachs Group (GS)
unit Spear Leeds & Kellogg.
The number of specialists firms has dwindled alongside the level
of business done on the NYSE floor, where an estimated 17% of daily
NYSE stock-trading activity now takes place.
The sale of the LaBranche business is symbolic, too, as it was
among the oldest specialist operations active at the exchange and
is headed by Chief Executive Mike LaBranche, grandson of the firm's
founder.
Currently, Barclays Capital, the investment-banking division of
Barclays Bank PLC, oversees about 900 NYSE-listed securities,
according to the company. LaBranche is responsible for 700
securities, ranking as the third-largest designated market maker in
terms of number of securities traded.
NYSE said it will work closely with both firms to ease the
transition.
"We welcome Barclays Capital's growing commitment to the NYSE
market model, investment in trading technology, and dedication to
NYSE-listed companies," said Larry Leibowitz, NYSE group executive
vice president and head of U.S. markets.
With the sale, announced late Wednesday, LaBranche will record a
$69.7 million charge, leading to an overall loss of $72.5 million,
or $1.38 a share, for the fourth quarter.
The company will retain all cash and its other assets, including
its shares in NYSE Euronext (NYX), after the deal closes, expected
later in January.
By transferring the DMM operation to Barclays, LaBranche will no
longer have a $76 million net-capital requirement related to the
DMM operations.
Alongside the sale, LaBranche's board increased the company's
share-buyback authorization to $100 million from $23.4 million and
approved the redemption of all the remaining $189.3 million in
principal of outstanding 11% senior notes due 2012 at 102.75% of
the principal.
LaBranche officials said they expected the moves would boost the
company's flexibility in managing its operations while leaving it
with significant liquidity resources and easing the company's
streamlining efforts.
"It looks like they're paying down debt and may be doing a
buyback, so it's likely the financials are going to improve," said
Richard Repetto, an analyst with Sandler O'Neill.
Shares of LaBranche were up 37% at $3.81 in after-hours
trading.
-By Jay Miller, Dow Jones Newswires; 212-416-2355;
jay.miller@dowjones.com; and Jacob Bunge, Dow Jones Newswires;
(312) 750 4117; jacob.bunge@dowjones.com
(Geoffrey Rogow contributed to this article.)