Profile: Michael Spencer of Icap

Michael Spencer once described himself as “the sad person you see reading the FT on the beach”. But when the City’s richest man scans through his press cuttings this week, he shouldn’t be too disappointed with the coverage.

News that his firm Icap (IAP), the world’s biggest inter-dealer broker, had walked away from a putative £6bn tie-up with the London Stock Exchange, had commentators lamenting what might have been. “The white knight rode in and rode on,” observed James Harding in The Times. “Paternoster Square is left exposed.”
 
Given the legend that Spencer, 51, has built around himself, the general sense of disappointment is understandable. Even his fiercest rivals – and there’s certainly no shortage of them – describe him as a genius.

He might have ditched the trademark red braces, but there’s no bigger star in “the testosterone-fuelled world of money broking”, says The Observer’s Richard Wachman. Since he started Icap in 1986, the firm has grown into a £3bn giant. A £100 investment in November 1999 would now be worth £1,083.

As well as his 22% stake in Icap, Spencer owns City Index, the spread-betting firm, and is also chairman of stockbroker Numis Securities. A friend and supporter of David Cameron, he’s often described as a City grandee. But, notwithstanding his famously explosive temper, one of his great strengths is his general clubability. Spencer is just as comfortable among the financial barrow boys as at the Savoy Grill. When he invited Cherie Blair to be guest of honour at a recent Icap charity day, notes The Independent, she departed “still smiling from her taste of raw capitalism”.

One of the most heartening features of Spencer’s story is the hash he made of his early career. The son of a civil servant, he spent his childhood in Africa before heading for Worth School. He studied physics at Oxford and considered becoming an astrophysicist, but plumped for the City instead.

He was fired twice – from stockbroker Simon and Coates and financial firm Drexel Burnham – for trading errors, including racking up huge losses in the gold market. But Spencer has always been a rainmaker, says The Times. “He was one of the first to spot the potential in the market for bonds and other derivatives.”

The rise of Icap was marked by Spencer’s often very personal rivalry with the chiefs of fellow brokers Collins Stewart Tullett and Cantor Fitzgerald. “There was a time when things were a bit rumbustious,” he says – something of an understatement. Spencer and Terry Smith of Collins Stuart clashed repeatedly in the courts over allegations of poaching talent and, two years ago, Spencer hit the headlines after the leaking of a controversial email he wrote about Smith. That spat, however, was nothing compared to the vicious exchange he had with Cantor boss Lee Amaitis when Spencer was quoted in another email as saying he “would love to put one up their [Cantor’s] bottoms”. Amaitis was later forced to deny he had plotted to kill Spencer.

For the moment, Spencer is well up in the brokerage wars, having pulled off his biggest deal in years in April when he beat rivals to acquire EBS, a currency and gold trading operation, that effectively doubled Icap’s size. But he can’t afford to rest on his laurels, says The Business. Terry Smith may be down, but he’s not out and should never be underestimated. In the months to come, “Spencer will be looking closely over his shoulder”.

Michael Spencer and the LSE: an ideal match?

Michael Spencer last waded into a bid battle involving the London Stock Exchange six years ago when he described the exchange’s then chairman, Don Cruikshank, as a “tosser” for trying to sell it to Deutsche Börse, say Jonathan Ford and Nicole Lee on Breakingviews.com.

The latest intervention is scarcely more helpful to the exchange’s current boss, Clara Furse, “in her fight to keep the LSE out of the hands of Nasdaq”. Spencer’s public withdrawal leaves Furse exposed: “It hardly strengthens her case against a Nasdaq deal that she would be prepared to contemplate a takeover by a non-exchange that would offer fewer cost synergies”. The Icap boss, meanwhile, emerges covered with glory. Having apparently balked at the exchange’s price, he “looks shareholder-value conscious for walking away”.

Still, it’s a pity, says James Harding in The Times. “Spencer was the LSE’s ideal saviour”, and there was a strategic logic to the deal, which would have created a powerful national champion. Icap’s technology platform enables more than $1trn in daily trading in derivatives and other instruments – making it a “natural counterpart” to the LSE’s equities service.

Quite so, says John Waples in The Sunday Times, and there may be calls from LSE investors to re-open talks. If Nasdaq does bid, a lengthy competition enquiry is likely, which would do little to support the LSE’s share price. That would play into Spencer’s hands – he has made it clear that if the price drops he’s prepared to re-enter negotiations. Clara Furse “has a lot of respect” for Spencer; while he described her in May as one of the people he most admires in business. This match might still be on.