BGC strikes a deal

February 20, 2015 02:00 PM

Late Thursday, GFI Group and BGC Partners reached an agreement on BGC’s tender offer to acquire the company. In late January, CME Group pulled its competing bid after reports began to emerge that its failure at a special meeting and vote of shareholders was imminent.

The all-cash offer, priced at $6.10 per share, has been extended until Feb. 26, in order to give all stockholders an opportunity to tender, releases from both groups stated.

BGC reduced the minimum tender condition to 43%, according to a release from the group. Late Thursday, 48% of shares were tendered, exceeding that minimum and proceeding with the offer.

BGC is urging shareholders to tender or keep their shares tendered to receive full value, according to a release. Shareholders who had previously entered into a support agreement with the CME are not expected to tender at this time, according to GFI.

As a result of the agreement, GFI will become a controlled company operating as a division of BGC, with its financial results entirely consolidated into BGC. The two organizations will remain separately branded divisions, according to a BGC release.

GFI Executive Chairman Mickey Gooch and CEO Collin Heffron will keep their management responsibilities within the newly-formed GFI division but will enter into employment agreements with BGC and be compensated on BGC terms.

BGC will also designate six out of eight directors on a newly expanded GFI Board, according to a BGC release.

“I believe GFI’s leading technology and advanced global market position will enhance the services provided to customers of our combined business,” Heffron said in a GFI release. “ More importantly, we look forward to working together as a separately branded division to continue providing market-leading intermediary services and trading technologies.”

In January, Richard Repetto, equity research principal at Sandler O’Neill + Partners, L.P., told Futures that BGC could stand to gain a lot from the acquisition of GFI Group, including a new trading platform and opportunities to expand internationally.

“We look forward to working with the management team and brokers of GFI as we build what we hope will be the largest and most profitable global wholesale brokerage company,” said BGC President Shaun Lynn in a release. “Our transaction will provide substantial benefits to GFI’s customers, counterparties, brokers, and other employees, all of whom will benefit from GFI being part of a larger, faster growing, and more diversified investment grade company.”

In January, the CME’s competing offer looked ripe to pass, with a major endorsement from Gooch, who initially called BGC’s offer a “highly conditional hostile tender offer.”

After an open letter from BGC Partners CEO Howard Lutnick and recommendations against the CME bid from proxy advisory firms Glass, Lewis & Co. and Institutional Shareholder Service, the CME bid failed at a special meeting of shareholders late Jan. 30.

At that time, the acceptance of the BGC tender offer looked uncertain. GFI wrote that they remained committed to exploring “strategic alternatives with any and all interested parties to maximize shareholder values for all shareholders.”

Behind closed doors, however, the two groups were able to work something out.  

BGC Partners Chairman and CEO Howard Lutnick was pleased by the deal, which he had been strongly advocating for all along.

 “We are thrilled to welcome the world class people from GFI into the BGC family,” he said in a GFI release. “We have an extraordinary opportunity ahead to grow with BGC’s strong financial position coupled with both companies’ extraordinarily talented brokers and market leading technology. We look forward to delivering strong earnings and cash flow growth to our shareholders going forward.”


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.