Jefferies raises $1.29 billion in stock and bond offerings

NEW YORK (Reuters) – Jefferies Group Inc (JEF.N: Quote, Profile, Research) raised $1.29 billion in stock and debt offerings this week, proceeds that will help the company finance its acquisition of Prudential’s commodities and derivatives trading business.

In a stock offering announced late Thursday, the New York-based investment bank raised $490 million. It priced 20.6 million shares at $24.25 each, a 3.5 percent discount to its closing price on Wednesday, before the acquisition was announced.

Jefferies also sold $800 million of corporate bonds. The notes mature in 2018, and have a coupon of 5.125 percent. They yield 2.2 percentage points more than comparable Treasuries.

Jefferies shares fell 0.5 percent to close at $24.60 on Friday and were down another 1.7 percent in after-hours trading.

The company is preparing to purchase a large trading operation from Prudential Financial Inc (PRU.N: Quote, Profile, Research). The company said it will pay $430 million for the business, to be called Jefferies Bache, which trades commodities and derivatives on and off exchanges.

Ticonderoga Securities analyst Douglas Sipkin estimates the equity raise and acquisition will dilute Jefferies shareholders’s stakes by 1 percent to 7 percent, depending on the earnings Bache can deliver.

Bache reported pretax earnings of $17 million in 2010 on revenue of $220 million.

Though Sipkin expects Jefferies shares to remain under pressure in the near term, he thinks the equity raise is a good move because it delevers Jefferies’ balance sheet and increases book value.

Gimme Credit analyst Kathleen Shanley, noting that Jefferies’ balance sheet is more leveraged than those of larger rivals such as Goldman Sachs Inc (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) and that its long-term debt is more expensive, kept an “underperform” rating on the debt despite the new offerings.

The company has not indicated whether it will retire existing debt now that the bond offering is complete. Jefferies representatives did not return requests for comment.

Jefferies, J.P. Morgan Securities LLC, Natixis Bleichroeder LLC and Citigroup Global Markets Inc were the joint bookrunners for the stock offering, while BNY Mellon Capital Markets LLC and BMO Capital Markets Corp acted as senior co-managers and Rabo Securities USA Inc acted as co-manager.

Jefferies was the sole underwriter for the bond deal.

(Reporting by Lauren Tara LaCapra; Editing by John Wallace, Phil Berlowitz, Gary Hill)

Jefferies raises $1.29 billion in stock and bond offerings