Getco Holding Co. has offered to merge with Knight Capital Group through a cash deal, valuing Knight at $538 million. Knight stock has fallen 75% over the past year, but news of the possible merger last week sent shares soaring.
Knight Capital has confirmed that it has received a proposal letter from market-maker Getco. However as a matter of policy, Knight doesn't comment on such matters.
Knight is a global financial services firm that engages in market-making and trading across global equities, fixed income, foreign exchange, options and futures. Located in New Jersey, Knight performs similar services as Chicago-based Getco. A specialist in high-speed market-making, Getco's central focus is trading for its own account. Knight, on the other hand, is a direct trader with online brokers servicing the orders of retail investors.
Getco and five other firms provided $400 million to bailout Knight in August after a trading program brought the company a loss of over $460 million.
Getco Chief Executive, Daniel Coleman, said in the proposal letter, "I am convinced that this merger would unlock tremendous value for the shareholders of both firms while establishing a global leader in market-making and agency execution." He continued, "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."
Getco has a 23.8% stake in Knight Capital and the proposed merger originally came with a 41% premium over Knight's share price of $3.50 (prior to merger rumors surfacing).
Getco isn't the only firm eyeing Knight. Virtu Financial LLC is said to have submitted an all-cash bid that would ultimately turn Knight into a private company, according to the Wall Street Journal.
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