JEF - Jefferies Financial to spin off energy holding and simplify corporate structure

Jefferies Financial Group ( NYSE: JEF ) is planning to spin off its Vitesse Energy unit before the end of the year, as it seeks to reduce the size of its merchant banking portfolio to focus on its investment banking business, the company said Tuesday.

JEF also plans to merge its two SEC reporting companies — Jefferies Group LLC and Jefferies Financial Group Inc. ( JEF ) — by fiscal year-end 2022 to simplify its corporate structure. The move will eliminate the requirement for two sets of 10-Qs, 10-Ks, and other duplicative processes. Jefferies Financial Group will assume the debt obligations of Jefferies Group.

In pursuing its plan to reduce its merchant banking portfolio, the company has also agreed to sell Idaho Timber in two transactions at a combined sale price of $239M, resulting in an estimated pretax gain of $140M.

As of May 31, 2022, Jefferies' ( JEF ) legacy merchant banking portfolio net book value was $1.6B and pro forma for the Vitesse Energy spinoff and the sale of Idaho Timber, the net tangible book value of the merchant banking portfolio would have been $1B.

Also in its merchant banking portfolio, Linkem is proceeding with the merger of its retail operations into Tiscali. Jefferies ( JEF ) also expects HomeFed to achieve liquidity over the next 18 months for a number of assets.

In connection with the consolidation, Terri Gendron, Jefferies' ( JEF ) chief financial officer, and John Dalton, controller and chief accounting officer, decided to stay with the company through the first half of 2023 then will pursue opportunities outside of the company. Matt Larson will become CFO after Gendron departs in 2023.

SA contributor Tim Travis says Jefferies' ( JEF ) tangible book value and dividend make the stock a Buy.

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