GFI derby heading to homestretch

January 29, 2015 12:49 PM

This story was updated with text from Gooch's latest letter to shareholders on Jan. 29 at 4:22 p.m. 

With the shareholder vote pushed to Friday, the bidding war for the acquisition of GFI Group Inc., between CME Group and BGC Partners has intensified with sharp criticisms and accusations of corporate mismanagement.

On Friday Jan. 23, GFI Group pushed the stockholder vote from Jan. 27 to Jan. 30 to allow stockholders additional time to review disclosures.

Terms of the special meeting remain unchanged. “Stockholders of record as of the close of business on Dec. 1 will continue to be entitled to vote at the Special Meeting,” a GFI release stated.

Open letters from both GFI Group and BGC Partners to GFI Group stockholders were released earlier this week trying to sway them towards or against acceptance of the CME bid.

These letters come following new recommendations from proxy advisory firms Glass, Lewis & Co. and Institutional Shareholder Service. Both firms warned GFI shareholders against the CME-GFI transaction.

GFI executive chairman Michael Gooch responded to these recommendations in an open letter to GFI Group stockholders that strongly suggested they vote to take CME’s bid. Gooch’s letter called BGC’s offer a “highly conditional hostile tender offer.”

“You can opt for a ‘bird in the hand,’ with CME,” Gooch wrote, “or hold out for ‘BGC in the bush.’”

A BGC spokesman could not speak on the record about the benefits of declining the CME offer for their bid. BGC has offered $6.10 in cash—a higher and more liquid offer than CME’s $5.85 mixed stock and cash bid.

As part of CME Group’s latest offer, the GFI executives making up the Management Consortium agreed to forego approximately $40 million of the original offer to be passed down to shareholders—a move that raised eyebrows among experts and shareholders alike and brought questions of corporate responsibility and management profit into the mix.

Gooch framed the change as a benefit to shareholders: “By taking this reduced sale price—and passing up a substantial portion of the premium that you and the other GFI stockholders will receive in the CME merger—we have improved the value for all of GFI’s stockholders,” he wrote.  

Gooch authored another letter, echoing the same sentiments, late on Jan. 29.

"In my opinion, BGC is setting up their own conditions to fail in order to leave themselves room to re-trade on price or, worse, not close or pay you for your shares," Gooch wrote. "I urge you to vote in favor of teh CME Merger so that ALL GFI stock holders can receive the tax-efficient $5.85 per share in merger consideration," he added, in bold type. "I also urge you not to tender your shares to BGC or vote against the CME merger. Doing so is a vote for uncertainty and against your own financial interests," Gooch closed the letter.  


BGC Partners CEO Howard Lutnick disagreed. In a similarly strong Jan. 28 letter advocating against CME, Lutnick wrote, “The actions of the GFI board have demonstrated remarkably poor corporate governance and raise serious key questions with respect to their fiduciary obligations to GFI shareholders,” Lutnick wrote.

“The full GFI board, under the influence of conflicted insiders, has derailed any attempt at a negotiated transaction by insisting that BGC sign long-term, no-poach agreements that only serve to benefit GFI management in their attempt to purchase the wholesale brokerage business at a discounted rate,” he added.

CME has yet to comment on the situation since raising its bid last week.

After the deal was initially announced on July 30, GFI stock increased from $3.11 per share up to $4.55. As the vote approaches, the price has remained consistent. At the time of publication, stocks are selling for $5.76 per share, lower than both the CME and BGC bids.

About the Author

Jaime Toplin is the editorial and web intern at Futures Magazine. She also contributes content to Hard Assets and the Alpha Pages. Jaime is a senior at Northwestern University's Medill School of Journalism, studying magazine and online journalism as well as legal studies. She is the VP of Public Relations for her student government and works for a Medill professor who researches digital media.