This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Knight Capital Group And GETCO Holding Company Agree To Merge

Stocks in this article: KCG

JERSEY CITY, N.J. and CHICAGO, Dec. 19, 2012 /PRNewswire/ -- Knight Capital Group, Inc. (NYSE: KCG, "Knight") and GETCO Holding Company, LLC ("GETCO") today announced they have entered into an agreement for a strategic business combination whereby GETCO and Knight will be combined under a new publicly traded holding company.

The combined firm will create a true industry leader as an independent market-maker and agency broker across geographies, market structures and asset classes. The resulting company will benefit from Knight's deep customer franchise and GETCO's leading edge technology platform, resulting in a company extremely well positioned to serve customers across multiple products globally.

Under the agreement, existing Knight shareholders (other than GETCO) will have the right to elect to receive $3.75 per share in cash or one share of common stock of the new holding company. The cash consideration will be subject to pro-ration if the holders elect to receive more than $720 million in cash in the aggregate. Jefferies & Company, Inc. and its affiliates, the largest shareholders in Knight, have agreed to limit their cash election to 50 percent of their Knight shares to the extent it is necessary to ensure that other Knight shareholders can receive their desired cash level up to the 720 million dollar aggregate amount. GETCO members will receive 233 million shares of the new holding company and the 57 million shares of Knight currently owned by GETCO will be retired. GETCO members will receive warrants in the new holding company as follows: 25 million warrants with a $4.00 exercise price and a four-year term; 25 million warrants at a $4.50 exercise price and a five-year term; and 25 million warrants at a $5.00 exercise price and a six-year term. Based on the tangible net worth of GETCO and Knight as of September 30, 2012, pro forma tangible book value of the combined company would be approximately $3.75 per share.

"After a thorough evaluation, the Knight Board of Directors unanimously concluded that a merger between Knight and GETCO provides the best possible value creation opportunity for Knight's shareholders," said Thomas M. Joyce, Knight's Chairman and Chief Executive Officer. "The transaction provides near-term certainty in the form of cash, while also allowing shareholders to benefit from participation in the future success of the firm. Broker-dealers and institutions will continue to experience the same industry-leading execution quality and client service they've come to expect from Knight, with the additional liquidity-enhancing capabilities of GETCO's renowned technology."

"The combination of Knight and GETCO will create a powerful, dynamic firm with an unmatched ability to deliver results for clients," said Daniel Coleman, GETCO's Chief Executive Officer. "Market participants will benefit from industry-leading services, and our larger capital base will provide strong support for existing operations, as well as an attractive currency for growth. We are looking forward to bringing the talented employees of both companies together and beginning to realize the full potential of the combined organization."

Mr. Coleman will become the Chief Executive Officer of the combined firm, while Mr. Joyce will serve as Executive Chairman of the Board of Directors. Steven Bisgay, Knight's Chief Financial Officer, will continue in that role for the combined company. The Board of Directors of the combined company will have nine members including Mr. Coleman and four other GETCO designees, and Mr. Joyce and three other Knight designees. The transaction is expected to be completed in the second quarter of 2013, subject to shareholder and customary regulatory approvals.

"General Atlantic is excited to support the merger of GETCO and Knight. We look forward to working with the combined company's board and management to build the world's leading electronic market making and institutional brokerage firm," said Bill Ford, Chief Executive Officer of General Atlantic, a growth investment firm that owns 25 percent of GETCO and has extensive experience as an active investor in market structure firms globally.

The $1.4 billion purchase price represents a 51 percent premium to Knight's closing share price on November 23, 2012. The amount also equates to a 15 percent premium to Knight's tangible book value, as of September 30, 2012.

GETCO has obtained commitments from affiliates of Jefferies for the financing necessary to complete the transaction, including refinancing all existing Knight and GETCO debt. General Atlantic will make an additional $55 million equity investment, which will bring their total investment in the new company to over $400 million.

Sandler O'Neill & Partners, L.P. is serving as the financial advisor and Wachtell, Lipton, Rosen & Katz is providing legal advice to Knight. Jefferies & Company, Inc. is serving as the financial advisor and Sullivan & Cromwell LLP is providing legal advice to GETCO. Bank of America Merrill Lynch provided a fairness opinion to the board of directors of GETCO.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs