Lutnick Defends eSpeed Deal

Cantor will control 65% (it currently controls 88% of eSpeed) of the planned BGC Partner entity, a stake that will be reduced over the next few years to about 45%.

"It's true that I play a significant role in both companies, but I played no role in the transaction of eSpeed's purchase," he added, noting that four independent directors on eSpeed's board approved the merger plan. The directors' job, he added, "was to make sure the deal was done in the best interest of shareholders, ignoring Cantor's interest."

Addressing the 6% premium being paid, which some observers consider low, Lutnick said eSpeed's board calculations valued its shares at a premium and wanted to acquire BGC at a discount.

One of activist shareholders' major gripes with eSpeed is its clubby, interwoven relationship with Cantor. The most vocal shareholder, Robert Chapman of Chapman Capital, has called for the sale of the company and a decoupling of its revenue streams.

As a part of the merger, eSpeed will cancel its revenue sharing agreements, in which it passed on 35% of revenue from certain portions of its business lines. The deal is expected to close either at the end of the year or in the first quarter.

The merger plan comes amid a raft of changes in the interbroker and exchange world, and Lutnick is betting that the combined shop will be able to better compete with interdealer brokers including London-based competitor ICAP and GFI Group headquartered in New York.

Lutnick views the tie-up as a significant move for Cantor, which lost hundreds of employees on Sept. 11, 2001, when the World Trade Center was destroyed.

"Today was a really wonderful day for us. It really spotlights the incredible distance that Cantor has come," Lutnick said. "I for one am so tremendously proud of what the employees of BGC have accomplished over the past few years," he adds.