Jefferies Group LLC to merge into Jefferies Financial Group Inc
Jefferies Financial Group Inc (NYSE:JEF) today announced strategic transactions.
Jefferies expects to streamline and simplify its corporate structure by merging Jefferies Group LLC into Jefferies Financial Group Inc by fiscal year-end 2022. This merger will, among other things, eliminate the requirement for two sets of Form 10-Qs, Form 10-Ks, and other duplicative processes at Jefferies, and result in Jefferies Financial Group assuming the debt obligations of Jefferies Group.
The company notes that, in conjunction with the further reduction of Jefferies’ legacy Merchant Banking portfolio due to the planned spin-off of Vitesse and sale of Idaho Timber, in 2023 Jefferies will no longer split out its legacy Merchant Banking investments as a separate segment for reporting purposes.
In connection with the planned corporate consolidation, Teri Gendron, Jefferies’ CFO, and John Dalton, its Controller and Chief Accounting Officer, have decided that they will remain at Jefferies through the first half of 2023, after which they will pursue opportunities outside Jefferies. Upon the completion of the entity merger, Matt Larson, currently Jefferies Group’s CFO, and Teri Gendron will be co-CFOs of Jefferies Financial Group. Matt Larson will become Jefferies’ CFO after Teri Gendron departs in 2023.
Rich Handler, CEO of Jefferies, and Brian Friedman, President of Jefferies, commented:
“Today’s announcement is yet another milestone in our long-term plan to focus Jefferies on its core businesses – investment banking and capital markets. Over the last decade since we combined Leucadia National Corporation (Leucadia) and Jefferies Group and ultimately became Jefferies Financial Group, we have made substantial and successful progress.
As we have made plain to our various stakeholders, our goal was to optimize value realization from the Merchant Banking portfolio while we continue to build Jefferies. By being patient and opportunistic in our efforts to monetize our legacy Merchant Banking portfolio, we have been able to achieve pre-tax gains of $1.8 billion through May 31, 2022 and $1.9 billion3 when taking into account the sale of Idaho Timber.
Likewise, over the past decade, we converted the $3.7 billion net operating loss carry-forward we acquired in the Leucadia years into substantial cash tax savings; and returned $5.6 billion through May 31, 2022 and $6.0 billion4 when including the Vitesse spin-off, to our shareholders by way of $1.3 billion in cash dividends, $878 million4 of in-kind distributions, and $3.8 billion through our share repurchases.
“While we are very pleased to have reached the point where the size of our Merchant Banking portfolio allows us to integrate our legal entities, we are disappointed to lose Ms. Gendron and Mr. Dalton. Although we welcomed their ongoing partnership at Jefferies, they both indicated that they were more interested in pursuing roles that are more compatible with their experience and expertise.
Since joining Jefferies in September 2014, Ms. Gendron has excelled in her role, guiding us through myriad elements of our business transformation, enhancing our public disclosures and reporting, helping to strengthen our internal controls and financial statements, leading the corporate staff at Jefferies Financial Group, and supporting the finance team at Jefferies Group, including when she also served as CFO of Jefferies Group for a period after we lost Peg Broadbent to the scourge of COVID-19. Likewise, Mr. Dalton, who joined us in 2015, exceeded our every expectation as a result of his expertise, remarkable work ethic, unbending attention to detail, and willingness to take on and master any assignment handed to him. And we are particularly grateful that Teri and John will work through the merger and transition to assure Matt Larson’s success as our CFO”.
Jefferies LLC acted as financial advisor to Jefferies Financial Group Inc. in connection with the merger, the Vitesse Energy spin-off and the sale of Idaho Timber.