Cenkos Says in Bid Talks with Close Brothers

LONDON (Reuters) - British boutique advisory firm Cenkos Securities Plc (CNKS.L) said on Monday it was in talks to buy investment bank Close Brothers (CBRO.L), ending a two-month standoff after its initial approach was snubbed.

"The boards of Cenkos and Landsbanki confirm that they are in discussions with Close Brothers regarding a possible recommended offer," Cenkos said in a statement.

Cenkos, which is working with Iceland's Landsbanki LAIS.IC, wants Close Brothers' corporate finance and asset management units, leaving Landsbanki with the banking division.

Sources familiar with the matter said Cenkos has made an indicative offer of 1,025 pence per Close Brothers share, subject to due diligence, which would value Close Brothers at more than 1.5 billion pounds ($2.9 billion). This is higher than its initial approach in November of 950 pence a share.

Close Brothers Chief Executive Colin Keogh met Cenkos CEO Andy Stewart on Friday, the sources said.

A Cenkos spokesman confirmed the meeting but declined to comment further on "market speculation." Close declined to comment.

"There can be no certainty that the discussions will ultimately lead to an offer for Close Brothers nor as to the terms or the price on which an offer might be made nor as to the timing of any offer," Cenkos said in its statement on Monday.

Cenkos, whose initial approach was rejected on Nov. 8 as "wholly inadequate," had since met Close shareholders to try to make them press the UK merchant bank's board to enter talks, a strategy known in M&A parlance as a "bear-hug."

Cenkos then last month asked Close, which has said it is in talks with other suitors, to grant it the same information as was available to other potential bidders, as it is entitled to under UK takeover rules, said the sources.

The sides still failed to enter talks however as Cenkos had, until Friday, refused to sign the non-disclosure agreement presented by Close as a pre-condition for access to the information, the sources added.

Cenkos had objected to a clause making it an insider, hence preventing it trading Close shares in the market and precluding any "dawn raids" to raise a stake in Close. It had also objected to a section limiting its ability to hire staff from Close.

The Sunday Times newspaper said that a revised bid could emerge within days.

Close, which said on Dec. 14 it received further approaches, is also in talks with buyout firm the Blackstone Group about a possible bid of more than 1,000 pence per share, and has been approached by India's Tata and Japanese firm Orix.

Cenkos added on Monday that any proposed acquisition would be funded through a combination of debt and a "significant" equity issue.

Close Brothers shares fell 1.2 percent to 983.5 pence, while shares of Cenkos rose 0.7 percent to 221 pence.

(Reporting by Mathieu Robbins and Miyoung Kim; Editing by Erica Billingham/Elizabeth Fullerton)