American investment bank Jefferies Group Inc has snapped up historic British stockbroker Hoare Govett from Royal Bank of Scotland , building on its aggressive expansion in the London marketplace in the past three years.

Jefferies will take on around 50 staff in London as part of the deal, including current Hoare Govett managing directors and some RBS equities and capital markets staff.

It will also gain a big list of clients among top UK companies, ranging from Rolls Royce to easyjet, making it an immediate contender in one of the most hotly contested corners of the British investment banking world.

Although most investment banks - including RBS - have been slashing headcount in the past year, battered by rising costs, paltry revenues and new regulations, Jefferies was one of the few firms still on the lookout for key staff in London, according to headhunters.

Taking on the Hoare Govett team is a bigger jump, although RBS said the sale was for a nominal cash consideration.

The deal also came with significant aid from the government-controlled bank, a source familiar with the process said.

RBS declined to comment.

RBS has been trying to limit restructurings costs as it shrinks its investment bank. This includes severance pay and several sources had already told Reuters RBS might consider alleviating that by helping to fund an eventual acquisition of parts of its investment bank.

Jefferies said buying up the corporate broking franchise - a UK oddity whereby firms offer equities advice to clients for minimal fees in the hope of getting lucrative business further down the line - would fit in with its build-out in other areas.

In Europe and Asia, the firm, which has about 3,900 staff worldwide, has brought in a raft of senior bankers to advise clients on merger and acquisition deals and stock market listings, for example.

Its joint heads of European investment banking, Dominic Lester and Peter Bacchus, are relatively recent joiners from UBS and Morgan Stanley.

But the firm will also have to hold on to the corporate broking clients it acquires and face off competition from other banks trying to poach customers.

Hoare Govett had been one of the most historic and prestigious brands in British stockbroking for much of the 20th century, along with Cazenove, but analysts also felt its brand value had been diluted after it got absorbed into ABN AMRO.


RBS, 83 percent owned by the British government after a state bailout during the 2008 credit crisis, acquired the Hoare Govett business as part of its disastrous acquisition of Dutch bank ABN AMRO.

RBS added that the sale to Jefferies - part of a drastic cut to its investment bank operations known within the company as 'GBM' (Global Banking & Markets) - was expected to be completed by the end of the first quarter.

RBS has come under pressure from Britain's Conservative-led coalition government to focus more on retail banking rather than its riskier investment banking arm.

The government has turned the screws since the start of the year on RBS, which has come to symbolise for many in Britain the worst excesses of the financial crisis.

The chief executive and chairman of RBS waived their 2011 bonuses following intense political pressure, while Britain also stripped former RBS boss Fred Goodwin - who led the ABN AMRO takeover that nearly led to the collapse of RBS - of his knighthood.

Last month, RBS said it would cut another 4,450 jobs as part of its retreat from investment banking. The cuts come on top of 2,000 at the investment bank in the second half of 2011 and account for more than a quarter of the unit's staff.

RBS said it was in active talks with other parties interested in acquiring other parts of its investment banking business and sources with knowledge of the matter have told Reuters Asian, Middle Eastern and Australian banks might be looking at the assets.

The exit of RBS from investment banking was inevitable. As a state owned institution and political football, strategic decision making is subject to different influences, said Alex White, partner at accountancy and consultancy firm BDO LLP.

RBS shares closed up 4.2 percent at 27.74 pence on Wednesday, still well below the average 49.90 pence at which the British taxpayer acquired its stake in the bank.

(Reporting by Sudip Kar-Gupta; editing by Jon Loades-Carter, Elaine Hardcastle and Andre Grenon)

(This story corrects Jefferies headcount number in paragraph 10 of story transmitted on Feb. 1)