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Morning Coffee: Jefferies Saves Jobs with Merger

For once, the fear of risk didn’t result in the hemorrhaging of talent. Leucadia’s proposed acquisition of Jefferies represents a rare bright spot in the investment banking world littered with layoffs, cutbacks and investor angst.

By buying the 72% of Jefferies it doesn’t already own, Leucadia is offering financial backing to a firm that, some say, has a balance sheet that can’t safely support investment in the volatile markets in which it plays. And in doing so, Leucadia likely saved the jobs of hundreds of Jefferies employees who would have been vulnerable if a competing bank made the purchase, something many analysts felt to be a likely scenario.

All 3,814 jobs at Jefferies are now safe, said Chief Executive Richard Handler. “If you look at a sale of an investment bank, this is as close to perfect as it gets,” Richard Lipstein, managing director at executive search firm Gilbert Tweed Associates, told eFC.

The amount of support provided by Leucadia borders on overwhelming. The $3.6 billion acquisition cost is 1.2 times Jefferies’ book value, according to the New York Times. Compare that to the stock price of Morgan Stanley, which is trading at 0.6 times its book value, or Goldman Sachs, trading at 0.9 times its book value.

Big banks may be too big to fail, but they also seem too big to invest in, at least when compared to their smaller brethren.

Off the Hook (Reuters)

Bruce Bent Sr. and his son Bruce Bent II, co-managers of the Reserve Primary Fund that “broke the buck” in 2008, have each been cleared of civil fraud charges. The younger Bent was found liable of negligence.

New York Unseats London (eFinancialCareers)

New York has officially overtaken London as the world’s largest financial center. Hong Kong and Singapore are quickly making up ground.

Avoiding Damage (WSJ)

J.P Morgan will be assessed a significant financial penalty for its sale of risky mortgage-backed securities, but no individual employees are expected to be prosecuted.

Low Conviction Count (WSJ)

While more than 460 U.S. banks have failed since 2008, only 17 executives running those institutions are currently jailed. You may not know any of them.

Swiss Cheese (Bloomberg)

HSBC is yet again the focus of a tax evasion probe. This time from British authorities, who are looking into claims that as many as 4,000 U.K. residents used HSBC accounts to avoid paying taxes.

Administrative Tasks (Business Insider)

If you’re thinking about becoming a junior investment banker, get used to the idea that you won’t be providing much value for some time.

Not Your Average Debt Settlement (AP)

NML Capital, a company owned by Paul Singer’s hedge fund, Elliott Management, has detained an Argentinian training ship and its crew in Ghana for over a month due to an unpaid debt. Last week, guns were drawn.

Buzz Around the Office

Dropping the ‘P’ Word (ABC)

President Obama was re-elected because he convinced Democrats that Governor Romney is a “poopy head,” according to Grover Norquist, the president of Americans for Tax Reform. Next up on Norquist’s media tour: Sesame Street.

List of the Day: Confidence

Sounding confident at work is critical to moving up the value chain. Here’s how to pull it off.

  1. When asked a question, end with a statement, not another question.
  2. Don’t apologize if it’s not your fault.
  3. Always give a recommendation rather than a list of pros and cons.

(Source: The Daily Muse)



AUTHORBeecher Tuttle US Editor

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