TR now leapfrogs ICAP-EBS to be the undisputed FX ECN leader.
Well it looks as if FXall will not be a public company very long. Less than six months after going public at $12 per share back in February, Forex ECN FXall has agreed to be acquired by Thomson Reuters for $22 per share, or a total of about $625 million. Those who bought shares in the IPO and held on should make a tidy profit of about 83%.
So why have FXall shares been trading above the agreed-upon $22 offer price??!! (A question several readers have asked us today). Clearly, some investors are speculating that the deal may not happen exactly as currently agreed. Oftentimes in public company acquisitions, pressure is put on management by large public shareholders to make sure the company is shopped around to all potential acquirers. And even if no other suitors emerge (at a higher price, at least), more pressure is put on both management and the acquirer to increase the bid at least a little, to get the key public shareholders to agree to the deal and allow the deal to go ahead quickly and smoothly. Essentially, the first bid made is not necessarily the best (or last) bid to emerge.
Assuming that the Thomson Reuters folks can ably combine the two businesses, the result will be the undisputed leader in the institutional electronic FX brokering business:
The strategic reasoning for the deal seems quite obvious: Thomson Reuters and rival ICAP-EBS, while still leading this industry, are both slowly bleeding clients and volumes to smaller aggressive upstarts such as FXall and Hotspot FX, as well as to a host of recent new entrants in the Forex ECN space. ICAP has taken some recent steps, such as replacing the CEO of EBS and moving to a half-pip pricing model from full decimalization to scare away high frequency traders. Now Thomson Reuters is taking even more direct action, acquiring a key rival which just in June saw its highest-ever volumes, at a time when other Forex ECNs are struggling to get back to last-year's levels.
For more on the global FX market see the LeapRate-Dow Jones Forex Industry Report.