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MF Global (MF) is weighing the sale of 10% in common stock to a handful of private equity players, a source close to the situation and a senior industry banker monitoring the circumstances from Europe told dealReporter.
Even so, management is thought to be very concerned with the thought of sharing ownership at the current depressed share price, said the source. He said he is inclined to believe that MF’s first preference would be to issue straight debt, followed by issuing convertible or preferred stock versus selling common stock. This source, however, did not rule out the possibility of a stake sale.
A person familiar with MF added that in addition to four to five PEs looking at the stake, he also heard there was an interested strategic, saying he assumed it was ICAP or Newedge. However, he added hearing that while Newedge had been approached by sponsors seeking to do a joint approach, it was too busy dealing with internal issues.
The London-based banker discounted the involvement of either strategic.
As for price talk on the potential stake sale, the person familiar said he thought the position could be subject to competitive bidding among the PEs and assumed it would come at a premium to where MF shares are currently trading.
The banker was not as confident; “I think it will be difficult because it’s not like Nymex or anything like that where it’s just an easy, smart investor getting in there, the timing’s perfect and you ride the upside… MF is now valued like Goldman Sachs on a price-to-earnings ratio of 10. You need to get it back to a P/E of 25, and it won’t happen overnight.”
A definitive move would likely be at least a month out, the banker said. However, MF has a USD 350m bridge loan set to mature in June, as per company filings.
The source said there was definite resistance to takeover overtures on the part of the company, likening it to “a great company and a good brand caught up in a bad market.” But there was always interest from more than one player for the whole company, he said.
This news service previously reported the company was being circled by opportunistic buyers seeking to capitalize on the company’s weakened state following its rogue trader incident; however, a stake sale to a financial player was seen as a more likely outcome.
MF Global is currently trading around USD 12.40 per share.
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