Virtu Financial, Inc. (VIRT) said it has agreed to acquire independent securities firm KCG Holdings, Inc. (KCG) in a cash transaction valued at $20.00 per KCG share, or a total of about $1.4 billion. The transaction, which has been unanimously approved by the board of directors of both companies, is expected to close in the third quarter of 2017.
Virtu Financial noted that the transaction will extend its scaled operating model to KCG's wholesale market making businesses and broaden the distribution of its technology and execution services to KCG's extensive institutional client base.
The company expects the transaction to provide significant further scale and financial benefits. Within two years of the completion of the transaction, Virtu expects to realize approximately $208 million of net pre-tax expense savings, in addition to $440 million of capital synergies. These savings do not include any revenue enhancements that Virtu anticipates to result from the transaction.
Jefferies LLC, the largest shareholder of KCG, has entered into a voting agreement pursuant to which it has committed to vote the 24.5 percent of KCG's outstanding voting power it holds for the adoption of the merger agreement.
Virtu intends to fund the cash transaction and debt refinancing with new gross borrowings of $1.65 billion and the sale of $750 million of common stock, priced at $15.60 per share.
Virtu has also entered into a commitment with J.P. Morgan Securities LLC, to provide up to $1.65 billion of debt financing for the transaction.
Further, the company said it intends to maintain its annual dividend of $0.96 per share after the close of the transaction.
Following the close of the transaction, Douglas Cifu, Virtu CEO, will remain CEO of the combined company. Joseph Molluso, Virtu CFO, will remain the CFO of the combined company.
Virtu plans to announce its full first-quarter 2017 results on May 4, 2017.
by RTT Staff Writer
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