Barclays Capital, the investment banking arm of Britain's Barclays Plc, has dropped plans to bid for stockbroker Cazenove but may reconsider at a lower price, a source familiar with the situation said.
The source said that senior management at Barclays Capital had been keen to bid for the 180-year old broker but that they were not prepared to pay the price Cazenove is seeking.
"They (Barclays Capital) could not make the numbers work and have agreed to walk away ... with the idea that if the price changes (falls) they (Barclays) may come back," the source said.
Cazenove, which has an estimated price tag of around 750-800 million pounds, last month said it is considering several take-over approaches but that it would still prefer to pursue a stock market flotation. Still, Barclays' withdrawal will narrow options for Cazenove chief David Mayhew and could clear the way for rival suitor Lehman Brothers to negotiate a deal.
The source said Barclays Capital saw Cazenove as a strong fit for the UK bank that could bolster its growing equity products business and give the debt-focused bank a new UK corporate finance business. Barclays declined to comment and Cazenove could not immediately be reached for comment.
Cazenove has been unofficially up for sale since it announced plans for a flotation in 2001 but its profits were then hit by a painful downturn in equity markets and three years on it is still looking for a buyer.
Sources say possible bidders are concerned that the UK broker could prove expensive if Cazenove's extensive client list, which includes nearly 50 blue chip companies in the FTSE 100 index, defects after a take-over or when Mayhew retires.
Many US investment banks see UK corporate broking as an essential ingredient to growth in UK investment banking but so far none have been prepared to pay up for Cazenove and some have looked for other ways to build a broking franchise.
Banks like Morgan Stanley have gone for the cheaper option, building up a corporate broking team by poaching bankers from rivals like Merrill Lynch.