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Oddo: increasing know-how
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As BNP Paribas and Exane were preparing to unveil their joint venture plans, Crédit Agricole was deciding what to do with the equities businesses it had picked up along with Crédit Lyonnais last year.
Crédit Agricole already had a strong brokerage business in the form of CAI Cheuvreux, which has the highest-ranked (13) pan-European research of any French broker, according to the July 2003 Thomson Extel Focus France Survey. Merging Chevreux with Crédit Lyonnais' weaker European brokerage business would have made little sense, as the overlap would have been too great. One French analyst says: "A good merger is one in which one plus one is more than two; Chevreux plus Crédit Lyonnais would probably be worth less than one."
Recognizing this, Crédit Agricole set about looking for a buyer for Crédit Lyonnais' European business, having decided to keep the more valuable equity derivatives and Asian businesses for itself.
It found an eager buyer in Oddo Securities, part of Oddo & Cie, a 150-year-old financial services partnership with brokerage, private banking, asset management and investment banking operations. The two first made contact on January 20. By February 5 they announced that they were in exclusive negotiations and two weeks later the deal, which, like the Exane BNP Paribas deal, takes effect this April, was signed.
"We wanted to increase our know-how and sales force globally," says Philippe Oddo, general partner at Oddo & Cie. "This deal will allow us to significantly increase our teams of analysts and salesmen, as well as the number of companies we follow. It will triple the size of our sales team in New York. By significantly increasing our market share it will push us up the rankings with institutional investors, give us greater economies of scale and put us in a stronger position to win new business."
A broader field for Oddo
And it's cheap for Oddo too. The financial terms of the deal were not disclosed in this case either but rivals believe that Crédit Agricole would have had to effectively pay Oddo to take Crédit Lyonnais' loss-making units by selling it cheaply and bearing the cost of the restructuring.
Most important, the deal will give Oddo a strong position in French mid-cap stocks to complement its existing strengths in the CAC 40. After the deal, Oddo will cover nearly 300 French stocks, including over 200 French mid caps.
Oddo also plans to targeting a limited number of sectors, specifically those in which French companies are prominent, such as luxury goods, pharmaceuticals, food, and retail. Other brokers including SG and CDC Ixis are adopting the same approach.