The Board of Directors of Gain Capital Holdings, Inc. (GCAP), a global provider of online trading services, today announced that it has rejected an unsolicited written proposal from FXCM Inc. to acquire GAIN for 0.3996 shares of FXCM Class A common stock for each share of GAIN common stock.
The GAIN Board of Directors, with the assistance of its financial and legal advisers, has completed a thorough evaluation of the proposal, as well as a range of options to build shareholder value. Based on its evaluation, the Board has determined that pursuing the transaction proposed by FXCM would significantly undervalue the Company and its prospects and would not be in the best interests of the Company's shareholders at this time. The Board therefore unanimously rejected the proposal and reaffirmed its commitment to GAIN's strategic plan.
Separately, Gain Capital Holdings, Inc. (NYSE: GCAP, "the Company") today announced that it has signed a definitive agreement to acquire Global Futures & Forex, LTD (GFT), a global provider of retail forex and derivatives trading with offices in London, Singapore, Tokyo, Sydney and Grand Rapids, Michigan. The purchase price is approximately $107.8 million which, including $80 million of GFT cash at closing, results in a net purchase price of $27.8 million.
The purchase price will be paid with $40 million in cash, a five-year $40 million seller note and the issuance of approximately 4.9 million shares of GAIN common stock. Both companies will initially retain their separate brand identities, while benefitting from significant synergies and capabilities across their complementary businesses. The transaction is expected to close in the third quarter of 2013, subject to regulatory approvals and customary closing conditions.
Founded in 1997, GFT offers forex, CFDs, spread betting, binaries and FX options primarily through its proprietary, award-winning Dealbook® platform. GFT has built an extensive network of partners throughout the world that accounted for over 75% of GFT's retail trading volume in 2012. This strong partner business complements GAIN's market-leading retail brand, FOREX.com, and the combined company will source approximately 52% of its retail volume from partners, with the rem remaining 48% coming from direct retail clients. In addition, GFT's growing Sales Trader business, which accounted for approximately 40% of GFT's total trading volume in 2012, fits well with GAIN's institutional execution desk, providing a substantial opportunity to expand the Company's institutional business.
The transaction is expected to be accretive in the first full quarter after closing, and first year operating synergies are estimated at $35-$45 million. The combined company will have pro forma client assets of approximately $650 million, a 2013 revenue run-rate of $329 million, based on first quarter 2013 revenues of $49.8 million and $32.5 million for GAIN and GFT, respectively, and a 2013 pro forma EBITDA run-rate of $77 million, based on first quarter 2013 EBITDA of $7.5 million and $1.8 million for GAIN and GFT, respectively, and assuming the mid-point of first year operating synergies achieved.
"Following our successful acquisition of GFT's U.S. business in December of 2012, we recognized that combining GAIN's operations with GFT was a significant opportunity to grow our business across the spectrum of retail and institutional products. The combined company will have a deeper global footprint, a robust offering of more than 12,500 financial products, and industry-leading trading platforms and tools. Our larger scale will also enhance GAIN's ability to take advantage of improved market conditions, while providing greater resilience at times of weak volatility," said Glenn Stevens, CEO of GAIN Capital. "This combination builds upon GAIN's strong track record as a successful industry consolidator and creates an even more robust platform for future consolidation and growth."
"This transaction is a natural fit, as it combines two highly complementary businesses to create a new leading player in the industry," said Gary L. Tilkin, CEO and founder of GFT. "Consistent with our history of partnering with respected market leaders, GAIN has a strong management team and an excellent reputation in the industry. I am enthusiastic about this opportunity to leverage our combined strengths to unlock significant value for both customers and stockholders."
Upon the completion of the acquisition, Mr. Tilkin will hold a 12% equity interest in GAIN and will become a member of GAIN's Board of Directors.
GFT clients should expect no impact to their accounts or how they trade. All clients will receive more detailed information about what they can expect from the combined company after the acquisition is completed.
Raymond James & Associates, Inc. provided a fairness opinion regarding the acquisition of GFT.