UPDATE 5-Leucadia to buy Jefferies in $2.8 billion deal

Mon Nov 12, 2012 3:20pm EST

* Deal will strengthen Jefferies' balance sheet

* Leucadia will be able to use tax benefits

* Expected to close in Q1 2013

* Jefferies' shareholders will end up with 35 pct of Leucadia

By Jed Horowitz and David Henry

Nov 12 (Reuters) - Jefferies Group Inc is selling itself to Leucadia National Corp, its biggest shareholder, in a deal aimed at reassuring investors it has access to long-term funding.

Leucadia, which models itself on Warren Buffett's Berkshire Hathaway and owns companies ranging from real estate to mining, is paying $2.76 billion in stock for the 71 percent stake of Jefferies it does not own.

The deal is the latest sign that Wall Street firms are scurrying to answer investor questions about their funding and long-term profitability in the wake of new rules and regulations.

Leucadia had previously purchased one million shares of Jefferies in November 2011 to calm market fears about the firm's viability during the European banking crisis and in the aftermath of the bankruptcy of MF Global.

The plan announced Monday values the combined company at $3.6 billion. Jefferies shareholders will receive 0.81 of a Leucadia share, valuing their stock at $17.66 per share, a premium of 24 percent to its Friday closing price of $14.27.

Jefferies shares were up 13.1 percent to $16.41 in late afternoon trading on the New York Stock Exchange. Leucadia was off 3.7 percent at $20.90.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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