UK merchant banks helped to finance the US railway system
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Shares in UK investment bank Close Brothers have gained almost 21%, after much smaller rival Cenkos Securities made a £1.4bn bid approach.
The offer for 950 pence a share was immediately rejected by Close Brothers as "wholly inadequate".
Cenkos, which is little more than a start-up, said it was keen to buy the investment banking and asset management businesses of Close Brothers.
Close Brothers was founded in 1878 to offer farm mortgages in Iowa.
Cenkos, which is about one-10th of the size of Close Brothers, had teamed up with Iceland's Landsbanki to make the offer. The deal would have seen Landsbanki taking control of Close Brothers' banking unit.
It said: "This proposal is at a very early stage and there can be no certainty that the approach will lead to an offer for Close Brothers or that if an offer were made it would be successful."
David vs Goliath
Shares in Close Brothers, one of the last independent British merchant banks best known for creating markets in the shares of London-listed companies, surged 159 pence, or 20.92%, to 919p in afternoon European trade.
Analysts believe that Cenkos could come back with a higher offer, also noting the possibility that Close Brothers was being eyed up by other interested parties.
Like many British merchant banks, Close Brothers played a part in financing the railway network in the US.
But it now offers a broad range of services, including investment funds, wealth management, corporate finance, security trading and lending.
In contrast, Cenkos was set up in 2005 and listed on the junior AIM market in London last year.
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