FX brokerage group Gain Capital Holdings Inc (NYSE:GCAP) has made a surprise move by exiting the institutional FX business, announcing that it reached a definitive agreement to sell the company’s GTX ECN business. GTX, an institutional platform for trading foreign exchange, will be sold to Deutsche Boerse AG (FRA:DB1), a leading diversified exchange organization providing services to the securities industry, via its FX unit, 360T.
The price paid for GTX: $100 million. In cash.
GTX generated $8.5 million of Revenue for GAIN Capital in the first quarter of 2018, or a run rate of $34 million annually – meaning that the deal was done at about 3x Revenues. Based on GTX’s estimated EBITDA of $5 million in 2017, the transaction represents a 20x multiple of trailing EBITDA.
Glenn Stevens, Chief Executive Officer of GAIN Capital said:
We are very pleased to have built GTX into a successful, high-demand institutional business over the past eight years. We have taken this strategic step in order to focus our attention and resources on our core retail business and on using available levers to unlock shareholder value. Proceeds from the sale of GTX provide us with additional financial flexibility to invest in organic growth and M&A opportunities, while providing increased liquidity to accelerate return on capital, which may include increasing the scale of our stock repurchase program and reducing our debt. We are pleased to be able to partner on this transaction with Deutsche Börse Group’s FX unit, 360T, a leading global FX venue.
The transaction is expected to result in proceeds of approximately $85 million for GAIN, net of taxes and transaction-related expenses and fees and is expected to close in the second quarter of 2018, subject to customary closing conditions.
GAIN initially launched GTX in 2010 as a venue for trading in FX and precious metals by institutional investors. Today, the business has over 150 unique clients, including banks, brokers, hedge funds, non-bank market makers, commodities trading advisors, asset managers and retail aggregators, and had over 700 unique users in 2017. For full year 2017, GAIN’s institutional business represented approximately 10% of the Company’s total revenue and 14% of EBITDA.
“Since our launch in 2010, GTX has grown to become a leading global FX platform serving all corners of the institutional trading community,” said Vincent Sangiovanni, GTX CEO. “GAIN has been a wonderful steward over the last eight years and today’s transaction highlights our success executing on the business model and continuously delivering exceptional products and support to our clients. Looking ahead, Deutsche Börse Group’s FX unit, 360T is an ideal partner for the next phase of GTX’s growth with its broad geographic distribution, complementary product set and deep knowledge of the FX space. We look forward to working closely with 360T to continue to deliver our clients with GTX’s innovative trading platform and high-quality customer service.”
Carlo Kölzer, Head of FX Deutsche Börse Group and 360T CEO said,
We are pleased to announce the acquisition of the GTX ECN business. The highly reputable player in the FX market is a meaningful addition not only to broaden our existing offering but also to complete our holistic value proposition designed to support all clients that operate out of all geographies and client segments based on current or potential future market structure.
Jefferies LLC served as exclusive financial advisor and Davis Polk & Wardwell LLP served as legal advisor to GAIN Capital.