A hot rumour swirling in the markets was that Jefferies and Co., a mid-market investment banking and trading house U.S., was about to be acquired by a Canadian bank.
Bank of Montreal, Toronto-Dominion Bank and Bank of Nova Scotia were all names bouncing around between trading desks on Friday as possible acquirors, and Jefferies shares were way up. None of the Canadians mentioned have huge U.S. securities operations, and all could swallow the roughly $5-billion price to snap up Jefferies and instantly become a big player south of the 49th.
But in the current regulatory environment, using that much capital and buying a U.S. securities business are both hard to imagine. What if the rules suddenly make owning a U.S. investment bank a millstone?
A more likely arrangement, banking sources said, is a joint venture between Jefferies and a foreign bank. Jefferies has no real balance sheet or lending capability, something it needs to compete and is known to be seeking.
Canadian banks have that, and could create a tie-up to rent a balance sheet without an outright takeover. But so too do many other global banks -- such as those in Japan -- so it's no sure thing that Jefferies goes with a Canadian.
Jefferies has historically been interested in Canada, negotiating a tie up years ago with Thomson Kernaghan, but that deal fell apart on a regulatory issue.
The only reminder on Bay St now that TK is long gone is the periodic sighting of a former TK stock jockey sporting one of the leather jackets in Jefferies green that were made up to mark the ill-fated deal.
A spokesman for Jefferies did not return a message seeking comment.