As we reported on Monday, in a story broke by the Wall Street Journal, Knight Capital Group Inc. (KCG) was possibly shopping its profitable market-making business and expecting offers from rivals Getco LLC and Virtu Financial LLC in the coming days. Shares of Knight have been on the rise with the rumored sale.
Wednesday morning, shares have popped another 16 percent to highs of $3.50 after Getco disclosed an offer to by the Jersey City, NJ-based trading firm for $3.50 per share in cash and stock deal. The price is a 41 percent premium to the closing price on Friday before WSJ reported the possibility of a transaction. Getco says that it has lined-up $950 million in financing to execute the deal.
In a letter to Knight’s board and CEO Tom Joyce that has been filed with the Securities and Exchange Commission, Getco chief executive Daniel Coleman explained the reverse merger would entail a two-step process involving shares being issued and others being retired while allowing existing Knight shareholders to “retain a meaningful equity stake in the upside of the publicly-traded, combined company.”
"The combined company's scale, footprint, and capability set would be a magnet to customers, talented traders and technologists, which is especially important in an environment of lower trading volumes and higher regulatory engagement," said Coleman in the letter.
Coleman would assume to role of CEO of the merged company while Joyce would be seated as non-executive chairman of the board. Getco is currently privately-held and would enter the public domain should a deal be finalized.
Knight has not publicly commented on the offer, other than to confirm that they received it.
The offer could trigger a bidding war with Virtu in coming days.
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