Business Wire

Jefferies Announces Strategic Transactions to Simplify Operations to Continue Focus on Building the Leading Independent, Full-Service Global Investment Banking Firm

Share

Jefferies Financial Group Inc. (NYSE: JEF) announced today that, adhering to its long-standing fundamental strategy of focusing on building its investment banking and capital markets businesses and reducing the size of its Merchant Banking portfolio, Jefferies expects to spin off to its shareholders its holdings in Vitesse Energy prior to the end of 2022. That spin-off will involve the formation of a new standalone entity, Vitesse Energy, Inc., that will ultimately be a publicly traded company listed on the New York Stock Exchange. Jefferies expects that its ownership interests in Vitesse Energy, Inc. will be distributed tax-free on a pro rata basis to all shareholders. At May 31, 2022, Vitesse had a net book value and net tangible book value of $427 million2.

In addition to spinning off Vitesse, Jefferies has agreed to sell Idaho Timber in two transactions at a combined sale price of $239 million, resulting in an estimated pre-tax gain of $140 million. These transactions are expected to close in August.

As of May 31, 2022, our legacy Merchant Banking portfolio net book value was $1.6 billion and pro forma for the Vitesse Energy spin-off and the sale of Idaho Timber, the net tangible book value of our legacy Merchant Banking portfolio would have been under $1 billion1. At the current time, Linkem is proceeding with the merger of its retail operations into Tiscali. The closing of this merger will provide Linkem further flexibility to pursue value maximization, consistent with our strategy to reduce our Merchant Banking portfolio. We also expect HomeFed to achieve liquidity over the next 18 months for a number of its assets.

In addition, Jefferies expects to streamline and simplify its corporate structure by merging Jefferies Group LLC (Jefferies Group) into Jefferies Financial Group Inc. (Jefferies Financial Group) 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. It bears noting 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 we will no longer split out our legacy Merchant Banking investments as a separate segment for reporting purposes.

In connection with the planned corporate consolidation, Teri Gendron, our CFO, and John Dalton, our 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 will be co-CFOs of Jefferies Financial Group. Matt will become our CFO after Teri departs in 2023.

Rich Handler, CEO of Jefferies, and Brian Friedman, President of Jefferies, remarked: “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.

“This $6.0 billion4 returned to our shareholders represents 60% of the combined $10.0 billion book value and about 80% of the combined $7.2 billion5 in tangible book value at the time of the Jefferies Group/Leucadia combination. Our book value as of May 31, 2022 was $10.3 billion and pro forma for all of the asset sales (including Idaho Timber), cash and in-kind dividends (including the Vitesse spin-off), we would have had as of May 31, 2022, a tangible book value of $8.1 billion6. Jefferies’ shares outstanding has been reduced by over 35% from 364 million at the time of the Jefferies Group/Leucadia combination to 232 million today and our fully diluted share count has been reduced by over 30% from 390 million shares7 to 260 million7 today.

“Most importantly, Jefferies Group has transformed from the strong niche Wall Street player it was in 2012, with net revenues of $3.1 billion, net earnings attributable to Jefferies Group of $282 million, and a global headcount of 3,804, to one of the world’s leading investment banking firms, with, on a last-twelve-months’ basis, net revenues of $6.0 billion, net earnings attributable to Jefferies Group of $1.3 billion, and a global headcount of 4,825.

“We are incredibly proud of our entire global team at Jefferies and, while the current market climate certainly presents short-term challenges, we could not be more optimistic about Jefferies’ ability to continue to grow and best serve our incredibly supportive and loyal client base. Today’s announcements will allow us to continue to focus on our core priorities and do our best to deliver for all of our important constituencies.

“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.

“As to Vitesse, we have been in business with Bob Gerrity and Brian Cree at Vitesse since 2013. During that time, they have shown themselves to be smart, strategic experts who have successfully grown and diversified Vitesse’s non-operating interests in oil and natural gas wells primarily in the Bakken formation. We believe in the Vitesse business and we believe that spinning off Vitesse to our Jefferies shareholders will ultimately unlock the fundamental value of Vitesse. We personally look forward to being meaningful direct shareholders of Vitesse and benefitting from its ongoing success.

“Finally, we note that Ted Ellis, Idaho Timber’s CEO, has been a great partner to Jefferies since 2005. During that seventeen-year period, Idaho Timber has consistently contributed to Jefferies’ bottom line, and in the past two years Idaho Timber has generated off-the-charts record performance. However, as Jefferies becomes even more intently focused on our financial services businesses, we have decided that it is the right time to sell our lumber-manufacturing business. We thank Ted and all of his valued partners at Idaho Timber for all they have accomplished. Ted is a remarkable human with incredible competency, decency and compassion.”

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.

Jefferies (NYSE: JEF) is the largest independent, global, full-service investment banking firm headquartered in the U.S. Focused on serving clients for 60 years, Jefferies is a leader in providing insight, expertise and execution to investors, companies and governments. Our firm provides a full range of investment banking, advisory, sales and trading, research and wealth management services across all products in the Americas, Europe and Asia. Jefferies’ Leucadia Asset Management division is a growing alternative asset management platform.

This press release contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current views and include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” "would," or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements may also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC. We undertake no obligation to update or revise any such forward-looking statement to reflect subsequent circumstances.

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s).

Non-GAAP Reconciliations

The following tables reconcile our non-GAAP measures to their respective U.S. GAAP measures. Management believes such non-GAAP measures are useful to investors as they allow them to view our results through the eyes of management, facilitate a comparison across historical periods and understand the expected impact of anticipated transactions. These measures should not be considered a substitute for, or superior to, measures prepared in accordance with U.S. GAAP.

1) Pro Forma Tangible Book Value of Merchant Banking Reconciliation

The table below reconciles our book value of Merchant Banking as of May 31, 2022 to pro forma tangible book value of Merchant Banking as of May 31, 2022 (in millions):

May 31, 2022
Merchant Banking book value (GAAP)

$

1,559

Less: Vitesse book value due to spin

(427)

Less: Idaho Timber book value due to sale

(122)

Less: Merchant Banking goodwill and intangibles

(45)

Pro forma Merchant Banking tangible book value (non-GAAP)

$

965

2) Tangible Book Value of Vitesse Reconciliation

The table below reconciles the book value of Vitesse as of May 31, 2022 to tangible book value of Vitesse as of May 31, 2022 (in millions):

May 31, 2022
Vitesse book value (GAAP)

$

427

Less: Vitesse goodwill and intangibles

-

Vitesse tangible book value (non-GAAP)

$

427

3) Pre-Tax Gains on Merchant Banking Sales Reconciliation

The table below reconciles the pre-tax gains on Merchant Banking sales to pro forma pre-tax gains on Merchant Banking sales including the estimated sale of Idaho Timber (in millions):

Pre-Tax Gains on Merchant Banking Sales
Pre-tax gains on Merchant Banking sales March 1, 2013 through May 31, 2022 (GAAP)

$

1,759

Estimated pre-tax gain on sale of Idaho Timber

140

Pro forma pre-tax gains on Merchant Banking sales (non-GAAP)

$

1,899

4) Return to Shareholders Reconciliation

The table below reconciles the total returned to shareholders to pro forma returned to shareholders including the announced spin off of Vitesse (in millions):

March 1, 2013 - May 31, 2022
Cash DividendsIn-Kind DistributionsShare RepurchasesTotal Returned
Total returned (GAAP)

$

1,313

$

451

$

3,802

$

5,567

Vitesse May 31, 2022 book value as estimate of in-kind distribution

-

427

-

427

Pro forma total returned including announced Vitesse spin off (non-GAAP)

$

1,313

$

878

$

3,802

$

5,993

5) Tangible Book Value Reconciliation

The table below reconciles our book value as of March 31, 2013 to tangible book value as of March 31, 2013 (in millions):

March 31, 2013
Jefferies Financial Group book value (GAAP)

$

10,042

Less: Goodwill and intangibles

(2,826)

Jefferies Financial Group tangible book value (non-GAAP)

$

7,215

6) Pro Forma Tangible Book Value Reconciliation

The table below reconciles book value to pro forma tangible book value including the announced spin off of Vitesse and sale of Idaho Timber (in millions):

May 31, 2022
Jefferies Financial Group book value (GAAP)

$

10,300

Less: Vitesse May 31, 2022 book value due to spin

(427)

Idaho Timber estimated gain on sale, net of tax

105

Less: Goodwill and intangibles

(1,885)

Jefferies Financial Group pro forma tangible book value (non-GAAP)

$

8,093

7) Fully Diluted Shares Outstanding Reconciliation

The table below reconciles shares outstanding to fully diluted shares outstanding (in millions):

May 31, 2022March 31, 2013
Shares outstanding (GAAP)

232

364

Restricted stock units ("RSUs")

17

15

Stock options

5

3

Redeemable convertible preferred shares

4

4

Warrants

-

4

Other

1

1

Fully diluted shares outstanding (non-GAAP) (A)

260

390

(A) Fully diluted shares outstanding include vested and unvested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans. Fully diluted shares outstanding also include all stock options, warrants and common shares issued based on conversion of our redeemable convertible preferred shares to common shares.

To view this piece of content from cts.businesswire.com, please give your consent at the top of this page.

Contact information

Laura Ulbrandt DiPierro
Jefferies Financial Group Inc.
Tel. (212) 460-1977

Jonathan Freedman
Jefferies Group LLC
Tel. (212) 284-2556

About Business Wire

Business Wire
Business Wire
24 Martin Lane
EC4R 0DR London

+44 20 7626 1982http://www.businesswire.co.uk

(c) 2018 Business Wire, Inc., All rights reserved.

Business Wire, a Berkshire Hathaway company, is the global leader in multiplatform press release distribution.

Subscribe to releases from Business Wire

Subscribe to all the latest releases from Business Wire by registering your e-mail address below. You can unsubscribe at any time.

Latest releases from Business Wire

Pharma Tech Holdings SA Obtains a Capital Commitment Agreement of CHF 30 million from Global Investor LDA Capital8.8.2022 10:50:00 CEST | Press release

Pharma Tech Holding SA (“PTH”) announced today it has secured a CHF 30 million investment to support its portfolio investments from LDA Capital Ltd, a global investment group with expertise in cross border transactions including the agriculture, Agri-tech, and CBD industries. Established in 2019, PTH is a Swiss based holding company, which invests into innovative businesses with high technological value and scalability potential, mainly in Switzerland and Europe, with a focus on the health-tech, Agri-tech, and functional food. This investment will allow PTH to mainly invest and support its portfolio company Blue Sky Swisse SA (“BSS”) a JV between PTH and listed company IGEA PHARMA NV (“Igea”), IGPH - ISIN NL0012768675. BSS focuses on the extraction of natural active principles from vegetable matrices, vegetable waste, and renewable sources to deliver B2B products under the form of CBD oil, Terpenes and Waxes. The factory located in Biasca, will be built to the state of art of extractio

Smile Hair Clinic Named 'Hair Transplant Clinic of the Year'8.8.2022 09:30:00 CEST | Press release

The Smile Hair Clinic took two awards in the ‘Highest Quality Hair Transplantation Clinic’, and the 'Hair Clinic of the Year' categories at the 13th Annual Quality of Magazine Klass Award Ceremony. Dr. Gokay Bilgin and Dr. Mehmet Erdoğan founded the Smile Hair Clinic in 2018 and have since overseen its successful and award-winning growth. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220808005053/en/ Smile Hair Clinic named 'Hair Transplant Clinic of the Year' (Graphic: Business Wire) Award Ceremony: https://www.youtube.com/watch?v=0TvUp2FxRII Accepting the award Dr. Bilgin said, "Our country holds an important position in medicine globally; patients from all over the world come to Turkey for treatment." Award winners Dr. Bilgin and Dr. Erdoğan have many years of experience in follicular unit extraction (FUE) techniques. Located on Istanbul’s Anatolian neighborhood of Ataşehir, the clinic has more than 100 trained personnel

Teckro Partners with Reforestation Non-profit “One Tree Planted”5.8.2022 15:04:00 CEST | Press release

Teckro, creator of the only digitally interconnected clinical trial platform for real-time decision-making at the point of patient care, today announced a partnership with One Tree Planted to support native reforestation in Ireland. Teckro will plant trees quarterly to celebrate new clinical research sites and studies live on the Teckro platform. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220805005165/en/ “Working with One Tree Planted aligns with Teckro’s ethos of making an impact in the world,” said Gary Hughes, co-founder and chief executive officer. “Digitally interconnected clinical trials are good for the environment with less paper and a reduced need for in-person monitoring visits. This partnership enables us to plant trees in recognition of the sustainable gains achieved with our platform.” Planting trees is one of the best ways to combat the damaging effects of climate change. Trees help clean the air we breath

SES to Participate in Upcoming Investor Conferences5.8.2022 13:45:00 CEST | Press release

SES AI Corporation (NYSE: SES), a global leader in the development and manufacturing of high-performance lithium-metal (Li-Metal) rechargeable batteries for electric vehicles (EVs) and other applications, today announced that management will participate and host one-on-one meetings at the following investor conferences. J.P. Morgan Auto Conference Date: August 9, 2022 Location: New York City Jefferies Industrials Conference Date: August 10, 2022 Location: New York City Baird Newly Public Company Virtual Access Day Date: August 17, 2022 Location: Virtual Piper Sandler Energy Transition Leaders Summit Date: August 18, 2022 Location: Aspen, CO Cowen Global Transportation & Sustainable Mobility Conference Date: September 8, 2022 Location: Virtual RBC Capital Markets Global Industrials Conference Date: September 12, 2022 Location: Las Vegas, NV About SES SES is a global leader in development and production of high-performance Li-Metal rechargeable batteries for electric vehicles (EVs) and o

Ipsen Extends Expiration Date of Tender Offer for Epizyme, Inc. to 11 August 20225.8.2022 07:00:00 CEST | Press release

Regulatory News: Ipsen S.A. (Euronext: IPN; ADR: IPSEY) today announced that Hibernia Merger Sub, Inc. (Purchaser), its wholly owned indirect subsidiary, has extended the expiration time for the previously announced tender offer to purchase all of the issued and outstanding shares of common stock (the Shares) of Epizyme, Inc. (NASDAQ: EPZM) (Epizyme) at a price of $1.45 per share, to the holder in cash, without interest and less applicable withholding taxes, plus one non-transferable contingent value right (CVR) per Share, until 11:59 p.m., Eastern time on Thursday 11 August 2022, unless further extended. The tender offer was previously scheduled to expire at one minute after 11:59 p.m., Eastern time, on Monday 8 August 2022. All other terms and conditions of the tender offer remain unchanged. Each CVR represents the right to receive one or more payments in cash, of up to $1.00 per CVR, contingent upon the achievement of certain milestones upon the terms and subject to the conditions d