Gain Capital (finally) closes acquisition of GFT

Acquisition will actually be net cash positive for Gain Capital.

Forex broker Gain Capital (NYSE:GCAP) has announced that it has closed its previously announced acquisition of rival GFT. The deal, first announced in April, followed a month-long flurry of activity which saw FXCM make a takeover bid for Gain, which Gain Capital fought off by introducing a poison pill defense and then ultimately itself agreeing to buy GFT.

Even before closing on GFT, Gain Capital and its and Gain GTX brands have seen tremendous growth in trading volumes and financial results in the first half of 2013. And Gain Capital’s share price has reflected that growth, nearly tripling so far in 2013 (more on that soon!).

Some interesting notes from the combination of the two companies:

Cash positive — Gain Capital will emerge with more cash-on-hand after the deal. Gain is paying out $40 million in cash as part of the purchase price, but will be inheriting $73 million of cash on GFT’s books. The remainder of the acquisition cost paid by Gain is in the form of stock (3.6 million GCAP shares) and a $33 million 5-year seller note.

Increase in volumes — on a proforma basis, GFT should increase Gain Capital’s volumes by about 29%. GFT has averaged about $130 billion per month in trading volume so far in 2013. GFT’s volumes break down almost exactly 50/50 between retail and institutional volumes.

Revenues growth — GFT should add more than 50% to Gain Capital’s top line. GFT had first half revenues of $67 million, while Gain Capital’s revenues came in at $123 million.

Client assets — GFT adds about 44% to Gain Capital’s client asset base. GFT brings $208 million of client assets alongside Gain’s existing $476 million.

Gain Capital also claims it expects operating synergies of $35-$45 million in the first year following closing, and that the acquisition is expected to be accretive to fourth quarter 2013 earnings. We’ll see…

For the complete Gain Capital press release click here.

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