Canadians Swoop On Stake In City Broker Oriel

One of Canada’s biggest banks is in talks to buy a stake in Oriel Securities, a leading City broking firm, as the consolidation sweeping across the sector gathers pace.

Sky News understands that Canadian Imperial Bank of Commerce (NYSE: CM - news) (CIBC) is negotiating the acquisition of a minority shareholding in Oriel , which was founded in 2002 and has long been touted as a potential takeover target.

The size of the stake that CIBC would buy and the price it will pay have not yet been finalised, but a deal could be tied up within a matter of weeks, according to people familiar with the talks.

CIBC's proposal has become the favoured choice of Oriel’s chief executive, Simon Bragg, following the termination of separate discussions that he held several months ago about a full merger with Panmure Gordon, another City broker.

Oriel, which has a multi-million pound loan outstanding from HSBC (LSE: HSBA.L - news) and like other brokers has been hit hard by the weak trading environment since the financial crisis, has nevertheless seen a recovery in its business performance this year, advising on deals such as the flotation of Conviviality Retail, owner of the Bargain Booze off-licence chain.

If a deal with CIBC is completed, it is expected to involve a broader alliance than the arrangement which currently involves the Canadian lender distributing Oriel research in North America.

It would also mark the latest tie-up between a Canadian bank and a City broker, following the takeover of Collins Stewart Hawkpoint by Canaccord last year.

A major round of consolidation has been expected in the small- and mid-cap broking industry for some time, and has accelerated in recent months, with the purchase of Evolution Securities by Investec (LSE: INVP.L - news) and Seymour Pierce falling into administration and being carved up earlier this year.

Oriel has had a long-standing relationship with HSBC but is understood to pay a high coupon on its loan from the bank.

It is unclear whether a deal with CIBC would include replacing that debt, but one source involved in the talks said the primary purpose of a transaction was to provide “expansion capital” for the London-based group.

Oriel is also understood to be in discussions about acquiring the broking business which services the junior AIM stock market of Nomura Code, another competitor.

In February, Oriel lost its chief executive when David Knox stepped down amid "strategic differences" with other managers. Mr Bragg, who holds a big chunk of the firm’s shares, took over from Mr Knox, who is now understood to be planning to establish a new broker.

Oriel has around 100 employees and boasted in April that it had raised more than £1bn for clients during the first quarter of the year, although it has shed staff during earlier rounds of cost-cutting.

Oriel declined to comment.

:: Picture of CIBC courtesy of Bill Burris