Leucadia National, a conglomerate whose business portfolio ranges from beef processing to wine and timber, will purchase up-and-coming Wall Street securities firm Jefferies, in a deal that will give the trading shop and investment bank an owner with deep pockets. The acquisition comes amid ongoing concern over whether the business model of smaller brokerages makes sense in the aftermath of the financial crisis.
Such concerns gathered steam when commodities brokerage MF Global Holdings was forced to file for bankruptcy protection in the autumn of 2011. Investors had grown skittish about lending to the company, as it emerged that MF had taken large positions in government bonds of risky European countries.
After the collapse of MF, Jefferies found itself under market pressure, but was able to successfully push back against rumors of excessive exposure to Europe by aggressively disclosing and reducing its positions. It also received an additional investment from Leucadia, which first invested in Jefferies in 2008 and already owned a roughly 28% stake in the company before news emerged of its plan to acquire the rest of Jefferies today. Leucadia is nicknamed “Baby Berkshire” for its likeness to the much-larger conglomerate, Berkshire Hathaway, run by billionaire Warren Buffett.