Gain Capital management has succeeded, it seems, in scaring off FXCM by using its cash to buy GFT.
When we first reported that Gain Capital was buying GFT and rejecting FXCM’s hostile bid, we stated that there were two likely outcomes. Either FXCM (along with certain Gain Capital shareholders, wanting a sale of the company) was going to take legal action to fight the Gain-GFT deal, or it was simply going to succumb to Gain’s “scorched earth” takeover defense and walk away.
Well it seems as if FXCM is doing the latter. FXCM has put out a formal press release (see full text below), stating that it is withdrawing its proposal to buy Gain Capital.
What happens next? Possibly, nothing. The only way we see a deal with FXCM (or another acquirer) happening is if unhappy Gain shareholders — such as Springhouse Capital — who would have preferred a sale of the company decide to take legal action against the Gain Board and management (as Springhouse threatened it might do in a letter to the Gain Board). Their case would be that the Board and management did not maximize shareholder value here, or at least properly examine the alternatives to maximizing shareholder value (i.e. try to drag a highest bid possible out of FXCM, or someone else), preferring instead to keep their cozy jobs and remain independent.
Stay tuned to LeapRate as this story continues to unfold….
For more on Forex industry M&A and financings, including M&A valuation comps and a deal list dating back to 2005, see the LeapRate-Dow Jones Forex Industry Report.
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April 25, 2013
FXCM Withdraws Proposal to Acquire Gain Capital
NEW YORK–(BUSINESS WIRE)– FXCM Inc. (NYSE: FXCM) today announced that in light of the recent announcement by GAIN Capital Holdings, Inc. (“GAIN”) of a definitive agreement to purchase Global Futures and Forex, Ltd. (“GFT”), FXCM is withdrawing its previously announced proposal to merge with and acquire GAIN.
“The cash consumed in the acquisition of GFT fundamentally impacts the balance sheet and capital synergies that were an important driver behind our proposal,” said Drew Niv, Chief Executive of FXCM.