JPMorgan Cazenove's joint venture owners are keen to decide whether J.P. Morgan should buy out its UK investment banking partner before bonuses are set for staff around the turn of the year, industry sources said.
A decision on a buyout or carrying on the JV should be made before bonuses are set by early January, according to the sources. Uncertainty about a deal and future structure of the company could see rivals attempt to poach staff.
Talks were delayed by recent changes at the helm of JP Morgan's investment bank, the sources said.
It named Jes Staley as chief executive of the unit in a surprise shake-up on Sept. 29, which saw the departure of Bill Winters, its London-based co-CEO of investment banking. [ID:nN29127846]. Winters had always been keen on taking full control of the JV, one person said.
A deal has not yet been agreed and talks continue, Cazenove said. It declined further comment. JP Morgan declined comment.
JP Morgan owns 50 percent of the joint venture and Cazenove Group owns the rest under a deal struck five years ago. Both JP Morgan and Cazenove have the right to trigger a full takeover by the U.S. bank in February, under put and call options.
Price is likely to be the key issue, however, and there is limited transparency on the value of the venture.
It was valued at about 700 million pounds ($1.17 billion) when JP Morgan bought its half in 2004.
Cazenove shares trade on an internal market, but only during narrow windows twice a year. They last traded at about 260 pence in March, up from 240p at the start of the year but down from 350p at the end of 2007.
Bank share prices have surged since March and the DJ Stoxx European Bank Index .SX7P has rallied 90 percent.
One person, who owns shares in the company, said a deal at 500 pence per share seemed reasonable. This person was not involved in the discussions.
At that price Cazenove Group would be valued at just under 1 billion pounds and the joint venture at double that.
Just under half of Cazenove's shares are owned by current staff, about 9 percent is owned by institutions and the rest are owned by former partners. There were 188.2 million ordinary shares in issue, according to its 2008 annual report.
David Mayhew, the chairman who joined Cazenove in 1969, owned 3.6 million ordinary shares, Finance Director Michael Power owned 1.9 million shares and Alan Carruthers, head of equities, owned 1 million, the report showed. Former directors Charles Bishop owned 1.8 million shares and John Paynter owned 2.1 million, previous reports showed.
JPMorgan Cazenove made a pretax profit of 134.5 million pounds in 2008, down 15 percent from the year before.
It has benefited this year from a rebound in financial markets and active equity and bond issuance, and it advised on bumper cashcalls by HSBC and Xstrata.
JPMorgan Cazenove is broker to 37 FTSE 100 companies and 93 FTSE 250 clients, well ahead of its nearest rivals UBS and Bank of America Merrill Lynch.
(Additional reporting by Alex Chambers; Editing by Rupert Winchester)