BGC Partners, Inc. (NASDAQ:BGCP), a global brokerage company servicing the financial and real estate markets, on Tuesday announced the completion of its merger with GFI Group Inc.(OTCMKTS:GFIG), an intermediary and provider of trading technologies and support services to the global OTC and listed markets.
- Impact on Financial Statements
Regarding BGC’s consolidated financial results, for the period from January 1, 2016 to January 11, 2016, approximately 33% of GFI’s post-tax distributable earnings are expected to be attributable to non-controlling interest in subsidiaries, while the remaining approximately 67% are set to be attributable to BGC’s fully diluted shareholders. From January 12, 2016 forward, 100% of GFI’s post-tax distributable earnings are expected to be attributable to BGC’s fully diluted shareholders.
- Selected Details of the Relevant Transactions
On January 12, 2016, BGC, Jersey Partners, Inc. (“JPI,”) New JP Inc. (“New JPI,”) Michael A. Gooch, Colin Heffron, and certain subsidiaries of JPI and BGC closed on a previously agreed upon merger. This merger provided for the acquisition of JPI by BGC as provided for by the merger agreement by and among the parties dated December 22, 2015.
Shortly after the completion of the JPI Merger, a subsidiary of BGC merged with and into GFI, with GFI continuing as the surviving entity. The Back-End Mergers allowed BGC to acquire the remaining approximately 33% of the outstanding shares of GFI common stock that BGC did not already own. Following the closing of the Back-End Mergers, BGC and its affiliates now own 100% of the outstanding shares of GFI’s common stock.
In the JPI Merger, each holder of JPI common stock, other than Messrs. Gooch and Heffron, received per JPI share held an amount equal (a) $6.10 multiplied by the number of GFI shares held by JPI, less the principal plus accrued interest on the $10.75 million note issued by JPI to BGC on October 6, 2016, divided by (b) the number of outstanding shares of New JPI common stock. This amount was paid 30% in cash and 70% in shares of BGC Class A common stock, valued at a price of $9.46 per share of BGC Class A common stock. Messrs. Gooch and Heffron received the same amount per JPI share held, subject to certain adjustments, but were paid 100% in shares of BGC Class A common stock.
- Cash Payment of $6.10 per Share
In the GFI Merger, each of the remaining outstanding shares of GFI common stock, other than those held by BGC and its subsidiaries, were converted into the right to receive an amount in cash equal to $6.10 per GFI share. Public shareholders who do not dissent (or their brokers) should expect to receive $6.10 per share from GFI’s Paying Agent, Broadridge Corporate Issuer Solutions Inc. within 10 business days, following completion of a properly completed Letter of Transmittal and applicable certificates by Broadridge.
- Other Details
In total, approximately 23.5 million shares of BGC Class A Common Stock and $111.3 million in cash are expected to be issued or paid with respect to the closing of the Back-End Mergers, inclusive of adjustments. The total purchase consideration for all shares of GFI purchased by BGC is expected to be $750.5 million, net of the $250 million note previously issued to GFI by BGC, which is eliminated in consolidation.
As a condition to the deal completion, Messrs. Gooch and Heffron have resigned as directors of the board of directors of GFI. Mr. Gooch keeps the titles of Vice Chairman of BGC Partners, L.P. and Chairman of the GFI Division, while Mr. Heffron remains the CEO of the GFI Division.
- Management Comments
Howard W. Lutnick, Chairman and Chief Executive Officer of BGC, said:
“We are happy to have completed the final step in merging BGC and GFI. The combination dramatically increases the scale and scope of the Company, and we expect the resulting improvement in BGC’s economics to produce tremendous value for our investors. We have an amazing opportunity to further grow and build the combined Company as our significant balance sheet liquidity is coupled with both firms’ extraordinarily talented staff and market leading technology.”
Shaun D. Lynn, President of BGC, added:
“The addition of GFI has already contributed greatly to what we expect to be a record year of distributable earnings for the Company. While the front office operations of BGC and GFI will remain separately branded companies, we continue to make excellent progress on integrating our back office, technology, and infrastructure. We remain on target to reduce our Financial Services expense annual run rate by at least $90 million by the first quarter of 2017. We also expect to generate increased productivity per broker, continue converting voice and hybrid broking to more profitable fully electronic trading, and to grow our high-margin market data, software solutions, and post-trade businesses, all of which should lead to further increases in revenues, profitability, and cash flow.”
You can view the detailed announcement on the merger completion by clicking here.