Jefferies has agreed to be bought by its largest shareholder, Leucadia National, in an all-share deal that values the independent investment bank at $3.6 billion.

The deal, in which Jefferies investors receive 0.81 of a share of Leucadia common stock for each Jefferies share they hold, will allow the bank access to the deep pockets of the Leucadia conglomerate.

The investment company is run by millionaire value investors Ian Cumming and Joseph Steinberg and has earned the nickname “Baby Berkshire” thanks to its varied holdings and contrarian strategy.

The deal is a 24 per cent premium to Jefferies’ market value of $2.9 billion last Friday.

The investment bank’s share price halved last year after the collapse of competing broker-dealer MF Global set off a wave of concerns over Jefferies’ funding and exposure to the troubled euro zone market. Despite the high valuation of Monday’s merger, the deal is likely to set off a wave of speculation about the prospects of investment banks given new regulation and lower market activity.

Last week KBW, a smaller investment bank, was acquired by Stifel Financial in another instance of consolidation among investment banks and broker-dealers.

“These deals are indicative of an extremely challenging environment for the standalone investment bank model,” Chris Harries, analyst at Wells Fargo, wrote in a note to clients.

Rich Handler, Jefferies chief executive, said that he had been thinking of a larger deal with Leucadia, which already owns a 28.6 per cent stake in the bank, for the past five years.

The bank has sought to play a larger role on Wall Street and boost its profile in recent years. Jefferies took over as the lead underwriter of Manchester United’s $233 million initial public offering in the US this summer after the English football club failed to get its float off the ground in Hong Kong and Singapore. – (Copyright The Financial Times Limited 2012)