"Baby Berkshire" Leucadia buys Jefferies Group

On Nov. 12th Leucadia National (LUK) announced it was buying Jefferies Investment Bank (JEF) for $2.6 Bn in stock. They're paying about a 22% premium for what the stock was trading. Leucadia plans to swap 0.81 of its shares for each Jefferies share. Leucadia already owned 28.6% of Jefferies prior to this merger, and is paying ~ 1.2x of JEF book value.

Jefferies gets the use of Leucadia National larger balance sheet. Leucadia has a liquid B/S of $2.4 Bn, less $960 MM debt.

Is this a buy that makes sense ?

For Jobseekers, I've included a video with Jefferies job advice at the end>>>

I believe so. JEF stock on Fri. ($15.75) was at almost half its peak of $30 about three years ago. Average analyst recommendation on the stock was a "HOLD" previously. Jefferies has BBB credit rating (S&P) while Leucadia is a junk BB+. S&P said it expects to upgrade LUK after the merger.

Jefferies CEO Richard Handler is expected to take over as CEO after the merger. Leucadia’s president, Ian Steinberg, will become Chairman. Jefferies was recently in the news for a $400 MM lifeline investment in trading firm Knight Capital.

Times are testing for investment banks. Stifel Financial agreed to buy KBW in a deal valued at $575 million. Gleacher & Co recently put itself up for sale.

Who is Leucadia National ? Leucadia is a holding company that also owns National Beef Meatpacking (a meat-packer), the Hard Rock Hotel & Casino in Biloxi, Miss and plastics and lumber businesses, among others. Leucadia also owned half of Jefferies junk-bond trading operation.

 

Don't know if it necessarily makes sense for LUK, but I've loved JEF for the past several months as one of those inbetween banks that's a full-service financial institution but still small enough to be nimble and snatch up the kinds of deals that larger banks would have a conflict of interest on or that would appear unsuitable for a "too big to fail" institution. Good managers and most of the MDs I've ever met from JEF have been pretty sharp guys. Also if I remember correctly there's been somewhat of an exodus of employees from a few other banks with entire teams migrating to JEF for whatever reason. I've always wanted to do a little digging on them and see if it's a stock worth owning, but looks like someone beat me to it.

I hate victims who respect their executioners
 
Best Response
BlackHat:
Don't know if it necessarily makes sense for LUK, but I've loved JEF for the past several months as one of those inbetween banks that's a full-service financial institution but still small enough to be nimble and snatch up the kinds of deals that larger banks would have a conflict of interest on or that would appear unsuitable for a "too big to fail" institution. Good managers and most of the MDs I've ever met from JEF have been pretty sharp guys. Also if I remember correctly there's been somewhat of an exodus of employees from a few other banks with entire teams migrating to JEF for whatever reason. I've always wanted to do a little digging on them and see if it's a stock worth owning, but looks like someone beat me to it.

Met a MD who did exactly this - I think he was in satellite tech at CS, then moved to JEF in the crisis. I got the impression they have a more "eat what you kill" attitude than a lot of banks on the street, at least at the senior level. Established MM firms are looking pretty good since the crisis - as the number of mega-deals has fallen, the BBs have been forced to play in MM's established territory.

 

This is outside the subject, and it probably's been covered many times, but I'll post it anyways as people look for internships (a list like it changes little over time) Top 10 FIN Internships (Courtesy of Forbes Magazine)

Blackrock has only started internship recruiting last week-That's very late-probably because of the storm earlier. Started at Columbia and NYU. "Employees had the opportunity to meet more than 200 students and to talk with them about the summer internship program and life at BlackRock".

Want to find out more? Link

Winners bring a bigger bag than you do. I have a degree in meritocracy.
 

Exercitationem occaecati dolor repellendus esse amet quia nam. Harum dolor quasi accusantium illo non. Alias architecto laborum at nobis libero. Est dolores aut excepturi. Voluptas rem sit ex non distinctio est earum est. Harum laborum architecto aut ea ad aut.

Commodi ab molestiae qui asperiores ad odio. Sint rem quos ipsam praesentium optio. Nulla laborum saepe quos.

Modi harum dicta porro tempora quo dolor quasi eveniet. Quasi quas ea soluta quo eligendi deserunt. Ea sed veritatis voluptatum id. Est accusamus amet perferendis odit. Et nemo tenetur incidunt cupiditate fugiat. Et nulla debitis sunt molestias ut.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Betsy Massar's picture
Betsy Massar
99.0
3
Secyh62's picture
Secyh62
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
DrApeman's picture
DrApeman
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
kanon's picture
kanon
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”