KCG trades its $280 million stake in Bats Global Markets to General Atlantic

Institutional market maker KCG Holdings, Inc. (NYSE:KCG) has announced a fairly interesting transaction, buying back the stake in KCG held by private equity firm General Atlantic, in return for KCG’s stake in ETF exchange operator Bats Global Markets, Inc. (Bats:BATS).

The exchange, based on current share prices for the companies involved, is worth about $280 million.

Under the terms of the transaction, KCG will exchange the 8.9 million BATS shares it owns for all of General Atlantic’s 18.7 million shares and 8.1 million warrants of KCG. In 2007, General Atlantic invested in GETCO, a predecessor to KCG.

The transaction is expected to close by the end of November, with a portion of the warrants to be settled in early January 2017.

General Atlantic is unlikely to hold onto its BATS stake for long. BATS agreed recently to be acquired by CBOE Holdings Inc. (NASDAQ: CBOE) for $3.2 billion. That transaction is expected to close in the first half of 2017.

As a result of the transaction, KCG’s total outstanding share count will be reduced by 18.7 million shares from total outstanding shares of 86.2 million (count as of September 30, 2016), and its outstanding warrants will be reduced to 5.1 million from 13.2 million.

Daniel Coleman, Chief Executive Officer of KCG, said,

We are pleased to have achieved such a positive outcome for both KCG and General Atlantic, our long-time partner.  We believe the accretive nature of this transaction further strengthens our efforts to create significant value for our shareholders today and for years to come.

KCG was advised on the transaction by Jefferies LLC and Sullivan & Cromwell LLP.

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