* To buy oil broker PVM Oil Associates for up to $160 mln
* Four-month revenue down 12 pct to 248 mln stg
* To cut jobs in drive to save another 20 mln stg a year
* Shares down 7.4 pct
(Adds analyst comment, details, PVM statement)
By Clare Hutchison
LONDON, May 9 British interdealer broker Tullett
Prebon is cutting more jobs and buying oil broker PVM
in its latest attempt to offset a drop in trading since the
Interdealer brokers, whose staff match buyers and sellers of
currencies, bonds and other tradable instruments, have been hit
hard in recent years, as new regulations led their traditional
investment bank clients to cut back on risky trading activities.
They have also faced sweeping reforms to their own industry,
as regulators push more derivatives trading onto electronic
platforms in a bid to make the market more open and safer.
Tullett said on Friday revenues had dropped 12 percent in
the four months through April and it would cut an undisclosed
number of jobs as part of a drive to save 20 million pounds ($34
million) a year - the latest in a series of cost-cutting plans.
It also said it agreed to buy London-based oil broker PVM
Oil Associates for up to $160 million to strengthen its presence
in the market for crude oil, the most actively traded commodity.
PVM, along with ICAP, Marex Spectron and Tullett, is
one of the four major players in broking over-the-counter (OTC)
oil products in London.
Analysts said it made sense for Tullett to diversify, but
remained concerned about the lack of improvement in its core
business with financial clients.
"Given the lack of visibility, people want to see it trade
very cheap before they get interested again," Espirito Santo
analyst Phil Dobbin said of Tullett's shares.
At 1030 GMT, the shares were down 7.4 percent at 292.4
pence, the biggest fall by a UK mid-cap stock and partly
reflecting the fact that the company will pay for much of the
acquisition of PVM by issuing new stock.
Dobbin said a sensible solution for the industry would be
for two of the three interdealer brokers below market leader
ICAP - Tullett, GFI and Tradition - to merge.
"But it's incredibly difficult to do because there has to be
an agreement on price and there can't be a premium," he said.
In 2009, trading in fixed-income products, which include
interest rates, credit, commodities and foreign exchange,
accounted for $141.6 billion in annual revenue across the top 10
investment banks, according to industry analytics firm
Coalition. By 2013, that figure had fallen to $73.9 billion.
Tullett said it made 248 million pounds ($420 million) of
revenue in the four months through April, a 12 percent drop
stripping out the effect of currency fluctuations.
Jobs at risk include broking roles in Europe, while cost
reductions could come in its technology services, which have
largely completed work to comply with new regulations, a source
familiar with the plans said.
Tullett said it would pay for PVM by issuing $112 million
worth of new ordinary shares, with the remainder coming in cash
or shares if certain revenue targets are achieved within three
years. PVM has no debt, Tullett said.
The purchase of PVM, which on average has a daily turnover
in excess of 100 million barrels of OTC oil derivatives and made
revenue of $107.5 million in the year ended July 2013, marks a
significant concentration in the oil broking market and is
subject to regulatory approval.
PVM, which employs around 200 people and has branches in
Singapore, New Jersey and Houston in the United States, will
retain its own brand, Tullett said.
PVM CEO David Hufton said the deal had the unanimous support
of PVM's shareholders, all of whom are employees of the company.
"The Board and shareholders of PVM consider that in the
light of the rising technology, regulatory and capital burdens
facing the industry it is the appropriate time to come under the
umbrella of a larger organisation," PVM said in a statement.
($1 = 0.5899 British Pounds)
(Additional reporting by Christopher Johnson; Editing by
William Hardy, David Holmes and Mark Potter)