UPDATE 2-Gleacher gives up search for a buyer; shares slump

Fri Feb 15, 2013 10:54am EST

* To sell ClearPoint unit to Ocwen financial

* Fourth-quarter loss $0.09/shr vs profit $0.01/shr year ago

* To ask shareholders to approve reverse stock split

* Shares fall as much as 29 percent

Feb 15 (Reuters) - Investment bank Gleacher & Co Inc gave up its search for a buyer or fresh capital and reported its fourth quarterly loss in a row, sending its shares sliding nearly 30 percent.

Gleacher, which had put itself up for sale in the wake of a prolonged slump in the merger and advisory business, said on Friday it would sell its mortgage lending unit ClearPoint to Ocwen Financial Corp for an undisclosed price.

Gleacher, founded by merger and acquisition veteran Eric Gleacher and with a market value of about $120 million, reported a fourth-quarter loss from continuing operations of $11.5 million, or 10 cents per share.

"Although we did not believe any proposal we received during the process adequately reflected Gleacher's value, we will, as before, be opportunistic in considering value-building strategic initiatives," Chief Executive Thomas Hughes said in a statement.

Eric Gleacher, who founded the company in 1990, stepped down as its chairman last month.

He created the mergers and acquisitions department at Lehman Brothers in 1978 and ran global M&A at Morgan Stanley from 1985 to 1990.

During his time at Morgan Stanley, he advised private equity giant Kohlberg Kravis Roberts in its famous takeover battle for RJR Nabisco and featured in the bestselling book on the deal, "Barbarians at the Gate".

The company said the board renewed its stock repurchase program, authorizing up to $10 million in buybacks.

On a conference call with analysts, CEO Hughes said the company will also ask shareholders at its upcoming annual meeting to approve a reverse stock split.

That would raise the company's per-share stock price and help it avoid delisting on the Nasdaq Stock Market for trading below $1 a share since the spring of 2012.

MBS REVENUE FALLS

Gleacher said net revenue for the quarter ended Dec. 31 rose 18 percent to $50.9 million, helped by strong investment banking results. Investment banking revenue surged to $12.7 million from $2.9 million.

However, revenue in the mortgage-backed securities (MBS) and interest rates business more than halved to $6.1 million.

"We have a revenue issue," Hughes said, regarding the MBS & rates business. While investment banking is making rapid progress, the company is "still working on taking two steps forward" in the mortgage and rates business, he said.

In the quarter, the company paid out nearly 82 percent of its revenue in compensation and benefits, far higher than the 60 percent it paid out last year.

Hughes said annual compensation is likely to rise to 70 percent of revenue this year because revenue will fall with the sale of ClearPoint, which is expected to be completed in the first quarter.

Shares of the company, which traded at $10 per share before the financial crisis, fell as much as 29 percent to 67 cents in early trading on the New York Stock Exchange on Friday.

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

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