An announcement made by inter-dealer broker BGC Partners Inc. (NASDAQ: BGCP) revealed that as of the time of the expiration of the tender offer made by the company for shares of the GFI Group Inc. (NYSE: GFIG), it has acquired 56.3 percent of the target company.
The tender offer has been successfully completed, putting an end to a lengthy takeover duel dubbed as the ‘alphabet battle’, since the CME Group (NYSE:CME) entered into a competition for control of a part of the company partnering with GFI’s management, but in the end putting a financially inferior proposal to the table when compared to BGC Partners.
At the time of the expiration of the tender offer at 5:00 PM yesterday, February the 26th, 2015, BGC Partners secured about 54.6 million shares, totaling around 56.3% of GFI's outstanding shares. The bidder will pay for the shares tendered on the 3rd of March 2015, with employees holding Restricted Stock Units (RSUs) getting compensation of $6.10 per RSU.
According to the announcement, GFI will become a controlled company operating as a subsidiary of BGC Partners, reporting to the President of BGC, Shaun Lynn.
BGC and GFI are expected to remain separately branded divisions.
GFI's current Executive Chairman, Michael Gooch, and its current Chief Executive Officer, Colin Heffron, will remain as Executives and Directors of GFI Group and shall continue as Chairman and CEO, respectively, of the GFI Division. Mr. Gooch shall also hold the title of Vice Chairman of BGC Partners, L.P.
Howard Lutnick, Chairman and Chief Executive Officer of BGC, commented in the announcement, “We believe the combination of BGC and GFI will create a strong and diversified company, well positioned to capture future growth opportunities. Through this combination, we expect to deliver substantial benefits to customers of the combined company, and we expect to become the largest and most profitable wholesale brokerage company.”
The President of BGC, Shaun Lynn, stated, "This is a highly complementary combination, which will result in meaningful economies of scale. While the front office operations will remain separately branded companies, we plan on integrating the back office, technology, and infrastructure of these two companies in a smart and deliberate way.”
“By the end of the first year, we expect to save at least $50 million annually on items including network infrastructure, telephone lines, data centers, vendors, disaster recovery, regulatory capital, and interest expense. We expect further cost savings in the second year and beyond. We also expect to generate increased productivity per broker and to continue converting voice and hybrid broking to more profitable fully electronic trading, all of which should lead to increased revenues, profitability and cash flows,” he concluded.
Board Reshuffling
The companies also announced that as part of the agreement with GFI, Marisa Cassoni, Frank Fanzilli Jr. and Richard Magee have resigned from the GFI Board. BGC has designated six directors to the expanded eight-member GFI Board. Three of these new board members are independent directors nominated by BGC. The new board members are Howard Lutnick, Chairman and Chief Executive Officer of BGC, Shaun Lynn, President of BGC, Stephen Merkel, Executive Vice President, General Counsel and Secretary of BGC, William J. Moran, Former Executive Vice President, JPMorgan Chase & Co., Peter J. Powers, President and Chief Executive Officer, Powers Global Strategies LLC and Michael Snow, Managing Member and Chief Investment Officer of Snow Fund One, LLC.
