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M&A: Cazenove bankers hit the jackpot

JPMorgan buys outstanding 50% share of UK broker ; Price paid implies each Cazenove banker is worth £3 million

David Mayhew, chairman of JPMorgan Cazenove

David Mayhew is expected to pocket about £20 million

Christmas has come early for bankers at JPMorgan Cazenove. Last month the US bank confirmed that it had agreed to buy the outstanding 50% share in its joint venture with UK broker Cazenove for £1 billion ($1.7 billion). The price paid implies that each Cazenove banker is worth £3 million. It is more than six times the amount that JPMorgan paid for the 50% of Cazenove it bought five year ago. Then it paid £159 million to establish a joint venture between the two firms, marking the end of Cazenove’s 185 years as an independent broker.

The new deal values the business at 535p a share, a 106% premium to Cazenove’s last quoted share price, or at 21 times 2008 earnings and six times book value. Cazenove shares trade on an internal market, twice a year. They last traded in March at about 260p.

The valuation is based on a basket of investment banks’ multiples but seems to be steep even for a business whose post-tax profits jumped 35% over the first nine months of the year.

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