FXCM Proposes Acquisition of Gain Capital
Combined Company Expected to be Accretive to All Parties
Conference Call Scheduled for 8:15 a.m. on Tuesday, April 9, 2013
Proposed Acquisition Highlights:
Would create an industry leader with potentially significant benefits
of improved scale economics
Pro forma 2012 revenues of ~$569 million, client assets of ~$1.6
billion(1) and estimated post-synergy run-rate Adjusted
EBITDA of between ~$163 and ~$183 million(2)
Potential significant operating synergies which can potentially drive
between $50 and $70 million in incremental run-rate EBITDA once
integration is complete
Potential capital synergies could result in the release of between $80
and $100 million in currently restricted cash
Projected to be accretive in 2014 after excluding one-time
NEW YORK--(BUSINESS WIRE)--
FXCM Inc. ("FXCM") (NYSE: FXCM), a leading online provider of foreign
exchange, or FX, trading and related services, today announced it is
proposing to merge with and acquire Gain Capital Holdings LLC ("GAIN")
The proposal was communicated this evening in a letter from FXCM to
Gain's Board of Directors, to inform them of FXCM's desire to reach
agreement on a transaction that would create the industry leader in
online FX trading.
"FXCM believes that the substantial potential operating and capital
synergies between the two companies would result in an accretive deal
with a strong growth profile and improved economies of scale," said Drew
Niv, CEO of FXCM. "Additionally, FXCM believes customers of both FXCM
and Gain will greatly benefit from the expected improvement of financial
strength and stability of the combined entity."
"This proposed merger is the highest priority for FXCM, and we hope that
Gain is as excited as we are about the potential a combined company
The proposed transaction would give Gain shareholders 0.3996 shares of
FXCM Class A common stock for each share of Gain common stock. Based on
FXCM's closing price of $13.39 on Monday, April 8, 2013, this results in
an offer price of $5.35 per share of Gain common stock, which in
aggregate would represent $210.4 million in total value. This price
represents a 25% premium to Gain's closing share price on April 8, 2013.
FXCM is also prepared to offer up to $50 million in cash consideration
in lieu of FXCM shares.
1 Pro forma figures exclude transaction fees and other
expenses associated with the proposed transaction.
2 FXCM Adj. EBITDA excludes certain items relating to the IPO
of FXCM and other one-time charges and non-recurring items.
FXCM will host a conference call to discuss the proposed business
combination at 8:15 a.m. (EST) tomorrow. This conference call will be
available to domestic participants by dialing 877.303.9132 and 408.337.0136
for international participants. The conference ID number is 34133919.
A live, audio webcast, a copy of FXCM's presentation and replay of this
conference call will also be available at http://ir.fxcm.com/.
The full text of the letter issued by FXCM to Gain's Board of
April 8, 2013
Board of Directors
GAIN Capital Holdings, Inc.
135 Route 202/206
New Jersey 07921
Attention: Peter Quick, Chairman
Attention: Glenn Stevens, Chief
Dear Members of the Board:
I am writing to you, on behalf of the Board of Directors of FXCM Inc.
("FXCM"), to make a proposal for a merger with GAIN Capital Holdings,
Inc. ("GAIN"). Under our proposal, we would be prepared to offer 0.3996
shares of FXCM Class A common stock for each share of GAIN common stock
(the "Proposal"). Based on FXCM's closing price as of April 8, 2013 of
$13.39, our Proposal represents an offer price of $5.35 per GAIN share,
which in aggregate would represent $210.4 million in total value(1).
Our Proposal would entitle GAIN's shareholders to approximately 15.7
million shares of FXCM Class A common stock, or a 16.2% ownership
interest in the combined company. Depending on the preferences of your
shareholders and their potential desire for immediate liquidity, we
would be prepared to include consideration of $50 million of cash in
lieu of stock. Our Proposal is not subject to any financing contingency.
Our Proposal represents a 25% premium to GAIN's closing stock price of
$4.27 as of April 8, 2013(1), and exceeds GAIN's 52-week high(2)
of $5.31 on April 27, 2012. We believe that, based on various financial
and operating metrics outlined in more detail in the attached slide
presentation (the "Presentation"), the Proposal represents an attractive
value proposition for your shareholders. Moreover, we believe the
substantial operating synergies, capital efficiencies, expanded
operating scale, and improved trading characteristics of the combined
company present a compelling rationale for this transaction and an
attractive opportunity for potential future appreciation in value for
Substantial Operating Synergies: As outlined on slide 11 of the
Presentation, we believe our overlap of products, target markets, and
regulatory requirements create a unique opportunity to potentially
realize material synergies through a merger. The regulatory requirements
of maintaining a presence in the world's major FX markets create high
fixed costs for brokers — by combining businesses, these fixed costs can
be leveraged over a larger revenue base. We estimate that when
integration is complete, synergies could potentially drive in excess of
$50 million in incremental run-rate EBITDA per year.
Capital Efficiencies: We believe the combined entity could also
potentially realize significant balance sheet and regulatory capital
efficiencies. As outlined on slide 12 of the Presentation, we believe
that a significant amount of GAIN's cash currently restricted as
regulatory capital and designated as collateral for trading partners
could be freed up and deployed to further enhance shareholder value.
Operating Scale: It is our strong view that scale is critical to success
in financial services and especially so in the global FX business, where
fixed costs and capital requirements are high and increase with every
regulated jurisdiction in which a firm has a presence. We believe that
brokers with operating scale enjoy consistently higher margins, lower
costs with trading partners and higher returns on equity. Slide 25 of
the Presentation illustrates this in a comparison of key metrics of
comparable firms including our own.
As illustrated in the Presentation, we believe that the combined company
would enjoy several enhanced attributes of our business model, and that
GAIN's shareholders would benefit significantly by participating in the
combined company. In particular, we believe that:
Increased, operating scale enables us to maintain / grow trading
volume and deliver more consistent results despite significant drops
in volatility; and
International diversity has helped us mitigate the impact of changes
in local regulations of any one particular key market, and that
diversity plus our agency model mitigates exposure to potential
adverse regulatory changes in the US market in particular
Attractive Trading Characteristics: We believe our Proposal offers GAIN
shareholders the opportunity to hold shares with improved trading
characteristics, including greater liquidity, more extensive research
coverage, fewer institutional investor limitations, and better
correlation with the positive performance of the business. With wider
research analyst coverage, average daily dollar trading volume over 8x
the average volume of GAIN, and a broader institutional investor base,
we believe our proposed exchange of FXCM shares for GAIN shares provides
GAIN shareholders with an immediate tangible benefit.
In summary, we believe our Proposal presents GAIN's shareholders with
the opportunity to exchange their GAIN shares for a share in a combined
business with significant potential for upside from synergies and scale
economics; multiple capital efficiencies; better protection against
market and regulatory challenges; and potential for expanded liquidity
to realize value in this transaction or at points in the future.
We have engaged Barclays and Financial Technology Partners as our
financial advisors and Simpson Thacher & Bartlett LLP as legal counsel.
We have completed an extensive, thorough analysis of GAIN's publicly
available information. We do not believe that there are significant
regulatory or other impediments to the consummation of the proposed
transaction. Our Proposal is subject to the negotiation of a definitive
merger agreement. Given our high level of familiarity with the retail FX
space and GAIN, we would need only to conduct limited confirmatory due
diligence and we are prepared to devote a cross-functional team of
senior managers to this important project.
We believe that a merger of our two companies would create an
industry-leader, allowing our shareholders to be part of a larger,
stronger organization. This merger is the highest priority for FXCM and
has the unanimous support of our Board of Directors and management team.
We aim to work together with you and the rest of GAIN's Board to work
through the details of our Proposal. We want to ensure that all of our
shareholders are aware of the opportunity to participate in the combined
company and are therefore publicly releasing the contents of this letter.
My team and I are available to meet with you, your management team and
your Board as soon as practicable to discuss the terms and merits of our
We look forward to hearing from you soon and working with the GAIN team
to advance the best interests of our respective companies and hope that
you will be as excited as we are about the benefits of this proposed
(1) Assumes 39.3 million total GAIN shares outstanding,
including 35.5 million basic shares outstanding, 2.2 million shares of
restricted stock and 1.6 million shares due to exercisable options. Also
assumes 81.6 million fully diluted FXCM shares outstanding.
(2) Based on historical closing prices.
/s/ Drew Niv
Chief Executive Officer
55 Water St, 50th
New York, NY 10041
CC: Board of Directors, GAIN Capital Holdings, Inc.
The supplemental slide presentation referenced in the letter above will
be available on the SEC website (http://www.sec.gov)
as well as on FXCM's Investor Relations website (http://ir.fxcm.com/)
tomorrow April 9, 2013
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, which reflect FXCM's current views
with respect to, among other things, its operations and financial
performance for the future. You can identify these forward-looking
statements by the use of words such as "outlook," "believes," "expects,"
"potential," "continues," "may," "will," "should," "seeks,"
"approximately," "predicts," "intends," "plans," "estimates,"
"anticipates" or the negative version of these words or other comparable
words. Such forward-looking statements are subject to various risks and
uncertainties. Accordingly, there are or will be important factors that
could cause actual outcomes or results to differ materially from those
indicated in these statements. FXCM believes these factors include but
are not limited to evolving legal and regulatory requirements of the FX
industry, the limited operating history of the FX industry, risks
related to the protection of its proprietary technology, risks related
to its dependence on FX market makers, market conditions , risks related
to the proposed transaction involving FXCM and Gain, which include, but
are not limited to, the risks that the proposed transaction may not be
completed; that, if completed, the businesses of FXCM and Gain may not
be combined successfully or that such combination may take longer, be
more difficult, time-consuming or costly to accomplish than expected;
that the expected synergies from the proposed transaction may not be
fully realized or may take longer to realize than expected and those
other risks described under "Risk Factors" as such factors may be
updated from time to time in FXCM Inc.'s most recent annual report on
Form 10-K, FXCM Inc.'s quarterly reports on Form 10-Q and other SEC
filings, which are accessible on the SEC's website at sec.gov.
These factors should not be construed as exhaustive and should be read
in conjunction with the other cautionary statements that are included in
this press release and in our SEC filings. FXCM undertakes no obligation
to publicly update or review any forward-looking statement, whether as a
result of new information, future developments or otherwise.
Any information concerning Gain contained in this release has been taken
from, or is based upon, publicly available information. Although FXCM
does not have any information that would indicate that any information
contained in this release that has been taken from such publicly
available information is inaccurate or incomplete, FXCM does not take
any responsibility for the accuracy or completeness of such information.
Important Legal Information
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any
vote or approval. This press release is being made in respect of the
business combination transaction with GAIN proposed by FXCM, which may
become the subject of a registration statement filed with the SEC. This
press release is not a substitute for any prospectus, proxy statement or
any other document which FXCM may file with the SEC in connection with
the proposed transaction. INVESTORS ARE URGED TO READ ANY SUCH
DOCUMENTS REGARDING THE PROPOSED TRANSACTION THAT ARE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Such documents would be available free of charge at the
SEC's website (http://www.sec.gov)
or at FXCM's website (http://www.fxcm.com)
by following the link to "Investor Relations" and then under the tab
"Financial Information — SEC Filings".
FXCM and its directors and executive officers may be deemed to be
participants in any solicitation of proxies in respect of the proposed
transaction with GAIN. Neither FXCM nor any of its directors or
executive officers beneficially own any shares of common stock of Gain.
Additional information regarding FXCM's directors and executive officers
is available in FXCM's proxy statement for its 2012 annual meeting of
stockholders, which was filed with the SEC on April 30, 2012. Other
information regarding potential participants in any such proxy
solicitation and a description of their direct and indirect interest, by
security holdings or otherwise, will be contained in any proxy statement
filed in connection with the proposed transaction.
About FXCM Inc.
Inc. (NYSE: FXCM) is a global online provider of foreign exchange,
or FX, trading and related services to retail and institutional
At the heart of FXCM's client offering is No Dealing Desk FX trading.
Clients benefit from FXCM's large network of forex liquidity providers
enabling FXCM to offer competitive spreads on major currency pairs.
Clients have the advantage of mobile trading, one-click order execution
and trading from real-time charts. FXCM's U.K. subsidiary, Forex Capital
Markets Limited, offers Contract for Difference ("CFD") products with no
re-quote trading and allows clients to trade oil, gold, silver and stock
indices along with FX on one platform. In addition, FXCM offers
educational courses on FX trading and provides free news and market
research through DailyFX.com.
Trading foreign exchange and CFDs on margin carries a high level of
risk, and may not be suitable for all. Please read the full disclaimer
For Investors and Media:
Jaclyn Klein, 646-432-2463
Corporate Communications and Investor Relations
Source: FXCM Inc.
News Provided by Acquire Media
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