Jefferies to Sell Bache Futures Unit, Buy Forex Operations

By Angela Chen 

Jefferies Group LLC has agreed to sell its Bache commodities and financial derivatives unit to Societe Generale SA, while bulking up in foreign exchange by buying Faros Trading LLC, the institutional foreign exchange brokerage of FXCM Inc.

The investment bank said in December that it was considering strategic options for the Bache business, which it bought from Prudential Financial Inc. in 2011. Meanwhile, Jefferies parent Leucadia National Corp. offered a rescue package to FXCM earlier this year after the brokerage suffered steep client losses due to volatility in the currency markets.

Jefferies bought the Bache unit--one of the most storied names on Wall Street--in mid-2011 as the firm sought to grow from a securities-industry boutique focused on stock trading into a full-service investment bank that helps clients raise money and trade stocks, bonds and derivatives, where investors and big industry players transfer the risks of future price movements.

The New York securities firm said in December that the business has faced growth and margin challenges, and the firm was in talks with third parties about a potential combination with a similar business to improve its competitive standing.

Meanwhile, Fred Orlan, Jeffries' global head of fixed income, said the deal to buy the FXCM unit is part of an effort to expand its capabilities in foreign exchange, especially in light of the recent currency volatility.

Faros Chief Executive Ray Kamrath will become global head of foreign exchange at Jeffries.

Earlier this year, Leucadia offered FXCM a $300 million rescue package after a surprise surge in the Swiss franc led to big client losses following the decision by the Swiss National Bank to eliminate the cap on the currency. The company said in February that it has begun to receive payments from FXCM and expects to recover more than a quarter of its investment within three months of the deal's closing.

Leucadia purchased Jefferies two years ago and in January agreed to pay $70 million to former shareholders to settle claims it underpaid when it bought the investment bank.

Shares of FXCM were up less than 1% in premarket trading, whille Leucadia was inactive.

Write to Angela Chen at [e-mail]

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