[ by Melanie Gretchen ]

Combined Entity will have $9Bn in Shareholder Equity.

Jefferies Group and Leucadia National Corporation agreed to a strategic combination that creates a combined entity with over $9 billion in shareholder equity.  Each Jefferies shareholder - other than Leucadia, which currently holds a 29% stake in Jefferies - will receive 0.81 shares of Leucadia for each share of Jefferies they hold.  The exchange is intended to be tax-free to Jefferies shareholders. 

Ongoing Operations.   Leucadia, with its 35-year track record as one of the world's leading long-term investors, will continue to acquire and own businesses and investments that will leverage the knowledge base, opportunity flow and execution capabilities of both the Leucadia and Jefferies management teams and operating businesses. Leucadia's existing businesses and investments have strong inherent value-creation potential.

Jefferies will continue its over 50-year focus in investment banking and the capital markets, and continue to maintain a highly liquid, client-focused balance sheet. Jefferies has grown rapidly over the past two decades and is well-positioned to continue this growth with Leucadia's support. As a subsidiary of Leucadia, Jefferies will have greater balance sheet resilience and flexibility to guard against, and take advantage of, market dislocations and opportunities. Jefferies currently pays substantial Federal income taxes and thus its expected ongoing pre-tax earnings will materially accelerate utilization of Leucadia's net operating losses, creating incremental value for all shareholders.

The combined company will be well-positioned to capitalize on Leucadia's investment expertise and Jefferies' investment banking and capital markets platform, including opportunities for enhanced growth, diversification and profitability that are expected to result from the combined management structure and increased business interaction.

Jefferies, which will be the largest business of Leucadia, will continue to operate as a full-service global investment banking firm in its current form - as noted above. Jefferies will retain a credit rating that is separate from Leucadia's. Jefferies' existing long-term debt will remain outstanding and Jefferies intends to remain an SEC reporting company, regularly filing annual, quarterly, and periodic financial reports.

Following the transaction, 35.3% of Leucadia's common stock will be owned by Jefferies' shareholders (excluding the Jefferies shares owned today by Leucadia and including Jefferies vested restricted stock units). Leucadia's Board of Directors has approved a new share repurchase program authorizing the repurchase from time to time of up to an aggregate of 25 million Leucadia common shares, inclusive of prior authorizations. Leucadia's Board also has indicated its intention to continue to pay dividends at the annual rate of $0.25 per common share, but on a quarterly basis following the merger.

For further details, go to:   [Dealbook, 11/12/12]   and  [Motley Fool, via Daily Finance, 11/12/12].