ITG (ITG), a leading independent broker and financial technology provider, today announced that it has signed a definitive agreement to sell the Calgary-based unit of ITG Investment Research (the “energy research group”) to Warburg Pincus, a global private equity firm focused on growth investing.
Subject to customary conditions, the transaction is expected to close by the end of 2015. Upon close, the energy research group will launch under a new brand name.
Under the terms of the agreement, Warburg Pincus will acquire the energy research group for $120.5 million in cash. ITG expects to book a gain of between $90 million and $95 million after taxes from this transaction. The transaction is expected to increase ITG’s tangible book value by between $2.85 and $3.00 per share.
The energy research group has a dedicated team of geological and petroleum engineers and financial analysts covering more than 150 companies operating in every key North American and many international energy plays. The transaction will include all of the 44 Calgary-based employees as well as the associated oil and gas sales team. Warburg Pincus intends to invest in the business moving forward, partnering with the company to enhance its product offering and client service and to continue to grow the investment research business for its institutional and oil and gas client base.
As part of this transaction, ITG will continue to provide the energy research to its institutional clients, serving as the exclusive sales partner for institutional investors. The transaction does not involve ITG’s non-energy investment research offerings.
Commenting on the transaction, ITG Chief Financial Officer Steve Vigliotti said, “We are pleased with the value we have been able to create for shareholders from the growth in energy research since we acquired the business in 2011. We look forward to partnering with Warburg Pincus and the energy research team to continue providing their exceptional research product to our clients.”
Cary J. Davis, Managing Director, Technology, Media and Telecommunications, Warburg Pincus, stated, “We look forward to partnering with management in this next chapter for the business. We are excited about building on the energy research team’s success with its differentiated product offerings and utilizing our information services experience to accelerate its growth plans, to the benefit of its institutional and oil and gas clients.”
ITG is currently evaluating alternatives for the use of the proceeds from this transaction, including strategic initiatives and share repurchases.
“ITG is not standing still,” said ITG interim Chief Executive Officer Jarrett Lilien. “We are managing our capital in a manner that is best for our business and our shareholders.”
ITG will provide more information about this transaction on its Third Quarter 2015 earnings call on November 5th at 11:00 AM ET. Visit investor.itg.com for call details.
ITG was represented by Wachtell, Lipton, Rosen & Katz, and Warburg Pincus was represented by Kirkland & Ellis LLP.