In order to be able to continue Jiway's operations with substantially lower costs, OM will take full control over Jiway as of 1 October 2001. OM will thereby become the sole owner of the Jiway trademark and Jiway's exchange, clearing, and back-office-for-hire operations, thereby integrating Jiway with OM.
According to the agreement Morgan Stanley will remain as market maker and trading party with respect to the Jiway exchange - The current market conditions have had a direct impact on Jiway's business and it is necessary to reduce Jiway's cost base. The interest we have seen in Jiway's business model combined with the lower cost base, makes us confident that the Jiway concept will be an important ingredient making securities trading more efficient, says Per E. Larsson, President and CEO of OM.
With the restructuring, operation of the exchange activities within Jiway Limited will be taken over by OM London Exchange, OM's Recognised Investment Exchange in London. By integrating the exchange operations within Jiway with OM London Exchange, significant cost synergies will be achieved, within for example personnel, adminstration, operation and IT.
The ownership of Jiway Broker Services, Jiway's facility management business for settlement and back-office services, will be taken over by OM's Technology Division. A restructuring of the operations will be carried out.
Once the operating result within Jiway Broker Service has reached break-even (estimated to the second quarter of 2002), OM's total operating cost for running the two Jiway companies following the restructuring, will amount to not more than SEK 20 million per quarter, based on current revenue levels. During the second quarter 2001, Jiway had a total negative effect on OM's operating result of SEK 116 m.
The restructuring of Jiway will, from a Group perspective, result in extraordinary effects on OM's profit & loss as well as balance sheet. Following write-offs, restructuring costs and positive tax effects, OM's net profit will be reduced by approximately SEK 145 million during the third quarter of 2001 (following SEK 408 million in non-recurring operating costs and SEK 263 million in tax gain). Shareholders equity will be reduced by SEK 145 m. Following the restructuring, OM's total book value of the Jiway assets, including Jiway Broker Services and the exchange operations within Jiway, will amount to SEK 170 m. OM's net cost for the Jiway project since its inception in February 2000 amounts to SEK 530 million.
The restructuring will have no major effects on Jiway's current range of services.
OM London Exchange will provide the necessary resources to ensure that Jiway continues to meet its regulatory obligations. The restructuring is subject to on-going approval of the Financial Services Authority and Finansinspektionen.
