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GAIN Capital Turns Down FXCM's Offer, Acquires GFT

Apr 25 2013
By
Forexbrokerz.com

Just as I was about to head for a coffee break, I was interrupted by some breaking news: GAIN Capital has finally made up its mind and gave the finger to FXCM by (almost politely) declining the latter's offer to buy it (frankly, we were expecting this after GAIN adopted a stockholder rights plan but now it's official). 

 
According to GAIN Capital officials, the company's Board of Directors got together with a team of legal and financial advisers, evaluated the proposal, then decided it's a no-go because the buyout “would significantly undervalue the company and its prospects and would not be in the best interests of the company's shareholders at this time”. 
 
This decided, the Board discussed possible options for raising the shareholder value of GAIN, then “reaffirmed its commitment to GAIN's strategic plan”. 
 
I sighed in relief that this is it and the whole drama is over – but just as I was back on track with my coffee break, GAIN came up with more news, announcing its preliminary Q1 results, and (hold your breath) – its plans to acquire GFT or what's left of it (a few months ago the Forex.com took over GFT's U.S. client base after GFT exited the American retail forex market).  
 
As it turns out, GAIN Capital has already signed an agreement for the acquisition of GFT at a purchase price of approximately $107.8 million (or a $27.8 net purchase, considering the $80 million of GFT cash at closing). All this will be paid out according to the following scheme: $40 million in cash, $40 in a five-year seller note, and the issuance of about 4.9 million shares of GAIN common stock. The deal is supposed to be finalized in Q3 of the year after regulatory approval. 
 
Glenn Stevens, CEO of GAIN Capital, commented on the deal: "Following our successful acquisition of GFT's U.S. business in December of 2012, we recognized that combining GAIN's operations with GFT was a significant opportunity to grow our business across the spectrum of retail and institutional products. The combined company will have a deeper global footprint, a robust offering of more than 12,500 financial products, and industry-leading trading platforms and tools. Our larger scale will also enhance GAIN's ability to take advantage of improved market conditions, while providing greater resilience at times of weak volatility".
 
For the time being, both the GFT and GAIN's Forex.com brands will be retained separately, and their customers will not be affected by the acquisition. GAIN promises that all clients will received more detailed information about the change later on. 
 
To be honest with you, I believe that this was a bold move on behalf of Forex.com - what better way to show the competition that your a sustainable, strong company than purchasing another company?! It seems to me that this is GAIN's way of saying "Hands off us!" and I have to admire that.
 
 

GAIN Capital's Preliminary Q1 Results

 
I feel obliged to share with you the GAIN's preliminary for the first quarter of the year, although you are probably more concerned with the GFT bomb. Here they are: 
 
- In Q1 of 2013 the company's net revenue reached $49.8 million, more than 50% higher than in Q1 of 2012.
- Client assets increased to $456.9 million.
- EBITDA for the period was $7.5 million, up from $1.3 million in the first quarter 2012.
- Net income was $4.3 million, or $0.11 per diluted share, compared to a loss of $1.3 million, or $0.04 per diluted share, in the first quarter of 2012.
 
 

About GAIN Capital

 
GAIN Capital Holdings, Inc. (NYSE: GCAP) is a global provider of online trading services. GAIN's innovative trading technology provides market access and highly automated trade execution services across multiple asset classes, including foreign exchange (forex or FX), contracts for difference (CFDs) and exchange-based products, to a diverse client base of retail and institutional investors.
 
Through our retail brand, FOREX.com, we provide retail traders around the world with access to a variety of global OTC financial markets, including forex, precious metals and CFDs on commodities and indices.  GAIN Capital also operates GTX, a fully independent FX ECN for hedge funds and institutions; Open eCry (OEC), an innovative online futures broker; and GAIN Securities, Inc. (member FINRA/SIPC) a licensed U.S. Broker-dealer.
 
GAIN Capital and its affiliates have offices in New York City; Bedminster, New Jersey; London; Sydney; Hong Kong; Tokyo; Singapore; Beijing; and Seoul.
TAGS: Forex.com  FXCM  Gain Capital  GFT  Q1 results  EBITDA  acquisition  forex trading  forex broker 

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