Brokers GFI and Tullett in merger talks: report

LONDON (Reuters) - GFI Group Inc GFIG.O and British rival Tullett Prebon (TLPR.L) are "days away" from merging to become the world's biggest interdealer markets broker, Financial News reported on its Web site on Thursday.

The deal will be structured as a merger of equals, Financial News said, citing a source close to the talks.

Both GFI and Tullett declined to comment.

A GFI spokesman said last November it had held merger talks with Tullett Prebon in July that year but the discussions were broken off because the two could not come to a "mutually satisfactory conclusion".

Analysts said a possible deal would be a good fit for both companies, saving cost and filling out product holes.

"We believe that a well structured deal would make both tactical and strategic sense for Tullett Prebon," Goldman Sachs said in a research note.

Tullett, the second-largest interdealer broker behind ICAP (IAP.L), has more exposure to traditional over-the-counter products in foreign currency and interest rate trading while GFI has more exposure to credit derivatives products.

If a merger goes ahead the new group would overtake ICAP (IAP.L) as the world's biggest interdealer broker by headcount.

GFI shares are trading at 9.6 times 2008 earnings while Tullett trades at 12.4 times forward earnings. Shares in Tullett were 0.61 percent higher at 450 pence at 8:27 a.m. EDT.

GFI group is due to report its second-quarter results after the New York market close on Thursday, followed by a conference call at 8:30 a.m. EDT on Friday.

Tullett generated revenues of 753.8 million pounds ($1.49 billion) in 2007 while those of GFI came in at $970.5 million.

That compared with ICAP's revenue of 1.3 billion pounds ($2.58 billion) in the financial year ending March 31.

(Reporting by Daisy Ku; Editing by Greg Mahlich)