Leucadia to purchase Jefferies for $3.6B

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About a year ago, Jefferies was swept up in the MF Global saga, as Egan-Jones issued a report cutting the broker dealer's credit rating for what it felt was its over-exposure to European debt.

The mere notion that it could follow MF Global was enough to spook investors, and the market promptly tanked the stock. Jefferies fought back adroitly, noting that Egan-Jones failed to take into account some hedges and offsetting positions. The bank then cut its European debt exposure dramatically in an attempt to end the issue. In the end, it survived the controversy, but perhaps it decided it needed a buffer.

It has struck a deal with Leucadia for $3.6 billion buyout. In some ways, it seems like a "reverse" deal. Leucadia currently owns about 28.6 percent of Jefferies, but after the deal, Jefferies' shareholders will own 35.3 percent of the new company.

"The deal will give Jefferies a deep-pocketed owner as it continues to build out a full-service investment bank. The firm has sought to raise its profile in businesses like mergers advisory in part to provide a counter-balance to its core business of trading stocks and bonds," notes the New York Times.

Richard  Handler, Jefferies' chairman and CEO, will take over as Leucadia's CEO. Joseph Steinberg, Leucadia's president and co-founder, will become chairman. Ian Cumming, Leucadia's current chairman and CEO, will retire but stay on as a director.

Wall Street will likely lose what had become an early warning indicator of big bank quarterly results, as Jefferies released ahead of the other banks, offering valuable insights into industry trends. But perhaps this is what Jefferies needs as it builds toward its goal of becoming a major investment bank.

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