Terry Smith is just weeks away from striking the deal which will see his Tullett Prebon merge with New York's GFI to give arch-rival Michael Spencer's Icap a run for its money as the world's biggest broker to the brokers.

“Talks are going very well and have been very constructive,” Smith declared today.
The East End-born former stockbroking analyst is negotiating the deal with Essex-born Mickey Gooch, who founded GFI 21 years ago and still owns 43% of the US business.

The combined business would be worth more than £1.6 billion compared with Icap's market value of £3.28 billion. “We've talked a couple of times before,” said Smith. “What is clear this time around is that there is nobody out there who doesn't find the logic compelling. It was never possible that we could announce the deal today alongside our first-half results. But I would hope a deal is just weeks away — possibly a month or a month and a half. It takes quite a while to do these transatlantic deals.”

He refused to be drawn on who will end up running the combined business. Gooch would clearly have a much larger stake in it if the deal is an all-share merger. But Smith is not seen by analysts as ready to walk away from Tullett Prebon, the inter-dealer broker, which is a business he virtually created through myriad deals over the past decade and then spun out of the stockbroker Collins Stewart in 2006.

Smith said: “We're both getting on very well and the talks are very constructive.” As for whether Spencer will stand by and see his global dominance challenged, Smith said: “There's always a danger of Mr Spencer intervening in one way or another because he recognises that we will be such a strong competitor to his business.”

But Smith believes that if Icap were to try to buy GFI Spencer could face problems with the competition authorities on both sides of the Atlantic. “He would have more than 40% of the market in some of the over-the-counter products. But more than that, I believe the banks, who are our major customers, would have some real concerns about the lack of choice they could end up with. Some of them are already looking a bit askance at the 800lb gorilla which has been created already.”

Smith is celebrating the first anniversary of the credit crisis which brought with it the huge rise in volatility on financial markets which is the bread and butter to inter-dealer brokers.

Tullett Prebon's revenues rose 25% in the first half to £486 million, with operating profits and pre-tax profits ahead by 30% at £84.2 million and £73.9 million. The interim dividend goes up by 19% to 4.75p a share. Smith said the industry cannot expect to keep up the same pace of growth in the second half, partly because it will be comparing itself with the start of the credit crunch.