Getco likely to divest Knight’s non-core assets, including Hotspot FX.
Although it has not yet been formally announced, sources close to the situation (and as reported by CNBC) reported that Knight Capital’s board will select Getco’s offer to buy the company, after Getco raised the cash portion of its bid to $3.60 per Knight share. Getco’s bid bested a rival offer from Virtu, which held firm at $3.20 per share. Both Getco and Virtu are privately held competitors to Knight in the equity market making business.
These sources also reported that Getco, backed by private equity firm General Atlantic and financing from investment bank Jefferies Group, is likely to divest most if not all of Knight’s non-core assets, including Knight’s Hotspot FX division. Hotspot FX is smaller than Forex ECN rivals Thomson Reuters, FXall and ICAP, but is still an important player in the institutional FX business. Based on comparables such as the recent $625 million acquisition of FXall by Thomson Reuters, we estimate that Hotspot FX should fetch around $150 million. Knight acquired Hotspot FX in 2006 for $77 million.
For more on Forex industry M&A and valuations, including a list of M&A transactions dating back to 2006 and a valuation comps table, see the LeapRate-Dow Jones Forex Industry Report.