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Virtu acquires KCG for USD 1.4bn
Posted on Thursday, 20 April 2017 14:02
Virtu Financial has made a formal USD 1.40 billion offer for KCG Holdings, a little over a month after sounding out the possibility of taking the stock broker private at a price between USD 18.00 and USD 20.00 apiece.

The New York, high-speed electronic trading firm and market maker has tabled a bid of USD 20.00 apiece, or 1.08 times the rival’s tangible book value of USD 18.61 as of 31st March 2017.

Its offer, aimed at gaining access new sources of attractive order flow and increased margins which improves its competitive edge, has curried favour with KCG’s largest shareholder with a 24.5 per cent voting power, Jefferies.

Virtu’s end game is to create a leading global electronic market making and agency execution firm pro forma net revenue of USD 982.00 million for the last 12 months (LTM).

It expects pro forma LTM adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of USD 328.00 million, an EBITDA margin of 33.0 per cent and a multiple of 5.1 times debt to LTM adjusted EBITDA.

Virtu has already secured USD 1.65 billion of debt financing from JPMorgan Securities for the deal as well as commitments from several investors to subscribe to the stock offering priced at USD 15.60 apiece.

North Island, which is managed by Robert Greifeld and Glenn Hutchins are buying USD 625.00 million-worth of shares in partnership with Singaporean sovereign wealth fund GIC and Canadian pension investment manager Public Sector Pension Investment Board.

Temasek, an existing Virtu shareholder, has also committed to investing an additional USD 125.00 million in common stock.

Stocks in KCG jumped 11.2 per cent in when the bell rang this morning to USD 19.72 on news of the takeover to give the company a capitalisation of USD 1.24 billion.

Virtu’s market value is currently almost double that of its rival – at USD 2.24 billion - and its own shares are up 7.7 per cent as at 09:36 ET.

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