CME said it would purchase GFI in an all-stock deal worth $580 million. The company will also assume $240 million of GFI's outstanding debt to bring the total value of the deal to $820 million. CME will also spin off GFI's wholesale brokerage business to a private consortium, which GFI's management will control.
GFI stock was up 44.05% to $4.48 at 11:39 a.m. More than 6.6 million shares had changed hands, compared to the average volume of 266,657.
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Separately, TheStreet Ratings team rates GFI GROUP INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate GFI GROUP INC (GFIG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GFIG, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- GFI GROUP INC's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GFI GROUP INC reported poor results of -$0.16 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.10 versus -$0.16).
- Looking at the price performance of GFIG's shares over the past 12 months, there is not much good news to report: the stock is down 32.68%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Capital Markets industry average. The net income has decreased by 14.4% when compared to the same quarter one year ago, dropping from $4.67 million to $4.00 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, GFI GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: GFIG Ratings Report