BGC, GFI agree to sell Trayport to ICE for $650M in shares

More news on the M&A front, as BGC Partners, Inc. (NASDAQ:BGCP) and its majority-owned division GFI Group Inc. have just announced an agreement to sell Trayport, a provider of trading and aggregation software in the global OTC energy and commodities markets, to Intercontinental Exchange Inc (NYSE:ICE).

The GFI sellers will receive $650 million in ICE common shares based on the closing stock price on November 13, 2015.

The ICE transaction does not involve GFI selling the FENICS FX suite of price discovery, pricing analysis, risk management and trading software tools.

Proposed Transaction Details

Under the terms of the purchase agreement, Intercontinental Exchange will acquire the equity of the companies that comprise the Trayport business. The GFI sellers will receive $650 million in ICE common shares based on the closing stock price on November 13, 2015. The aggregate number of ICE common shares is approximately 2.5 million, and up to approximately 0.8 million additional ICE common shares based on a sliding scale from $193.85 to $258.47 in the event that ICE’s weighted average stock price over a specified period leading up to closing is less than $258.47.

ICE-200x150GFI will have the right to sell its ICE common shares pursuant to a registration rights agreement.

ICE may elect to substitute cash for part or all of the stock consideration owed to the GFI sellers.

Subject to certain closing conditions, including receipt of required regulatory approvals, the transaction is expected to close as early as the first quarter of 2016.

After the close of the transaction, BGC and GFI are expected to remain customers of Trayport.

Management Comments

Howard W. Lutnick, Chairman and Chief Executive Officer of BGC, said:

“The agreement to sell Trayport for $650 million clearly demonstrates the value that this leading platform provides to the global energy and commodities markets. This is a business that has counted both BGC and GFI as customers for many years, and we expect to continue to use it for the foreseeable future.

“While in many ways we would have benefited from continuing to own Trayport, the proposed transaction is the most direct way for us to unlock value for our shareholders. Indeed, one of the main reasons that BGC pursued GFI was the expectation that the sale of Trayport would dramatically lower the price and risk involved with respect to purchasing the rest of GFI’s businesses. The proposed sale price represents $650 million of the $750 million that BGC will pay for all of GFI. This translates into BGC paying approximately $100 million for $640 million of GFI’s remaining revenues, or a multiple of just 0.16 times sales. Therefore, we expect the GFI transaction to produce enormous value for BGC’s investors.”

Shaun D. Lynn, President of BGC, added:

“While Trayport provided less than 3 percent of BGC’s consolidated revenues in the third quarter of 2015, the consideration we will receive represents approximately 20 percent of BGC’s fully diluted market capitalization. As the overall integration of GFI continues, we remain on target to reduce our Financial Services expense run rate by at least $90 million by the first quarter of 2017. This $90 million improvement in profitability will actually be more than Trayport’s total annual revenues of approximately $80 million, and more than double Trayport’s pre-tax earnings. Therefore, we expect to make the Company much more profitable going forward, even before we invest the proceeds from this sale.”

To view the official announcement from BGC, click here.

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