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Collapse of merger talks hits JLT’s stock

Heath Lambert pulls out of merger discussions with JLT

This article appears courtesy of Reactions

UK broker Heath Lambert has withdrawn from talks with rival UK broker Jardine Lloyd Thompson (JLT) that could have led to JLT buying Heath Lambert.JLT’s share price fell to £3.50 ($6.44) on July 13, the day of the announcement, from £3.90 the day before. JLT’s share price had previously spiked because of rumors about the proposed acquisition.

Analysts say JLT’s shareholders were disappointed when the talks ended because buying Heath Lambert could have greatly improved JLT’s earnings prospects.

Estimates for the effect on JLT’s earnings vary from analyst to analyst. Some predicted the purchase would have only increased JLT’s 2007 earnings a share by about 13%, but others predicted a much higher figure. Investment bank Numis Securities, for example, thinks the purchase could have improved JLT’s 2007 earnings a share by 25%, based on cost savings of £20 million and a combined UK cost base of £330 million.

Now the deal is not going ahead, investors have refocused on JLT’s recent lacklustre results and the prospect of tough times ahead for the broker.

“Without a potentially earnings-enhancing acquisition, attention now reverts to the performance of JLT’s own business, where prospects for strong earnings-a-share growth appear challenging given the tough trading conditions,” says Richard Gradidge, an analyst at Numis.

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