Changes to a complex deal between Tullett Prebon (TPLR) and ICAP (IAP) result in a transaction that now looks like a reverse spin-off of ICAP's financial technology business.

Tullett Prebon shares which were to be issued to ICAP under the deal will now be passed through to ICAP's shareholders.

In an announcement after the close yesterday (21 June), ICAP said it would no longer retain the 19.9% stake it was set to receive when Tullett takes over its voice broking division.

Instead, the shares are being passed on to ICAP shareholders, meaning they will now directly own 56% of the enlarged Tullett Prebon share capital, rather than the 36.1% previously announced.

Unusual and complex transactions like the Tullett/ICAP deal, which will lead to ICAP shareholders owning a majority stake in Tullett, are watched carefully by investors as they can sometimes create opportunities.

IAP - Comparison Line Chart (Rebased to first)

ICAP shareholders will not only maintain a stake in the ongoing ICAP business, which will be smaller and more focused on financial technology.

They will also receive a large stake in Tullett, which becomes the largest voice broker in the world.

Voice broking is a transaction service offered by inter-dealer brokers like ICAP and Tullett to execute difficult-to-settle trades.

In this case, it is the financial technology business, which is to be renamed NEX  on completion of regulatory approval, which looks like the spin-off unit.

NEX will be a 'focused electronic and post trade group with a leading portfolio of financial market infrastructure businesses and products,' according to ICAP.

Higher-than-average returns from spin-off stocks, also known as demergers, have led to an exchange-traded fund, Guggenheim S&P Spin-off ETF (CSD:NYSE), which attempts to offer investors exposure to opportunities of this kind.

Specialty pharma outfit Indivior (INDV), a straight spin-out from parent Reckitt Benckiser (RB.), has gained 55% since it started trading in late 2014 versus 30% on Reckitt.

But spin-offs do not always work out well.

In 2015, Glencore (GLEN) passed through shares it owned in platinum miner Lonmin (LMI) to its shareholders only a few months before the latter was forced into a highly dilutive rights issue.

Owners of shares distributed by Glencore to its shareholders are likely now to be sitting on losses.

Mining outfit South32 (S32) has declined in value since a straight spin-off from BHP Billiton (BLT) in 2015 but is one of the best performing mining companies over the last year, despite a tough market.

Other current spin-off opportunities include insurer Esure's (ESUR) strategic review into its GoCompare price comparison website, which it says could result in a demerger to shareholders.

Alongside yesterday's announcement, ICAP and Tullett said they are looking to sell their Europe-focused oil broking businesses because of competition concerns around combining the two entities.

Disclosure: The author owns shares in Indivior

Issue Date: 22 Jun 2016