Citicorp Seen Divesting Piece of Brokerage
Citicorp is on the verge of selling a part of securities broker Lynch, Jones & Ryan for $5 million to $15 million, according to people close to the company.
The deal, which could be signed within the next two weeks, culminates a two-year effort to sell the company, which specializes in "soft-dollar" commissions.
The buyers include seven Lynch Jones executives and the Transportation Group, an investment banking boutique that specializes in the shipping and airline industries.
Profits Have Lagged Behind
Lynch Jones offers research and other investment services to customers in return for their pledge to execute trades through the brokerage. Sources said the business has not been very profitable in recent years.
The planned sale does not include Lynch's best-known product, the Institutional Brokers Estimate Service, or IBES. The service, which provides investment managers with summaries of analysts' opinions, was severed from the brokerage part of the firm after efforts to sell the entire company failed.
IBES, which is considered more valuable, is still for sale. Until three months ago, Citicorp was in talks to sell it to Thomson Financial Services, which owns the American Banker, according to Andrew Mills, head of Thomson Financial Services.
Officials at Citicorp, Lynch Jones, and the Transportation Group declined to comment.
Part of Asset Sales Strategy
It was unclear whether the sale price would mean a gain for Citicorp. However, any gain would be too small to have any significant impact on the company, which is trying to build capital by selling nonstrategic assets.
The part of Lynch Jones that is being sold has only about $10 million in assets, one source said. However, a sale would sever about 55 employees from Citicorp's payroll.
The Transportation Group is expected to buy 50.1% of the company, and management would own 49.9%. Howard Schwartz, senior vice president of sales and marketing at the brokerage, is expected to be chief operating officer, reporting to Joseph Stuart, chairman of the Transportation Group.
The buyers are expected to inject $2 million to $7 million in capital and raise funds for the remainder. Citicorp will finance part of the deal by buying a security for several million dollars, a source said.