Getco emerges as victor in Knight Capital bid battle

Getco emerges as victor in Knight Capital bid battle

Getco has emerged as the winner in a two-way bidding war to take over Knight Capital, beating out rival Virtu with an improved £1.2 billion cash and shares offer.

Knight Capital, which executes about 10% of US equities by volume, was rescued from bankruptcy by a group of investors led by Jefferies and including Getco after a bungled upgrade to an algorithm trading programme left the group nursing a $400 million loss.

Getco, which initially offered $3.50 per share to take over Knight, won out over rival Virtu after upping its bid $3.75 per share and raising the level of cash from 50% to 66%.

The purchase price represents a 51% premium to Knight's closing share price on November 23, 2012. The amount also equates to a 15% premium to Knight's tangible book value, as of September 30, 2012.

Under Getco's proposal, Knight chief executive Thomas Joyce will be installed as executive chairman of a combined firm, with Getco's Daniel Coleman taking on the mantle of CEO.

Getco has obtained commitments from affiliates of Jefferies for the financing necessary to complete the transaction, including refinancing all existing Knight and Getco debt. General Atlantic will make an additional $55 million equity investment, which will bring their total investment in the new company to over $400 million.

Getco is expected to dispose of Knight's subsidiary interests in bond and foreign exchange trading - and its 20% stake in Direct Edge may also be up for grabs - as it focusses its energies on the company's prized US market-making business.

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