GAIN Capital Holdings (NYSE:GCAP) has formally entered into an agreement to acquire FX, CFD and UK spread betting firm, City Index Limited, for $118million, with a net purchase price of $82 million, including $36 million in cash.
The new deal will effectively forge a streamlined entity in Online Trading , which encompasses both GAIN Capital Holdings' Forex .com and City Index’s marquee CFD and spread bet brands.
Transaction Terms
In terms of specifics, the newly combined company will boast a service to 235,000 retail customers across 180 countries with an annual trading volume numbered at more than $3 trillion.
Overall, the purchase price of City Index will be $118 million, which upon further analysis consists of $20 million in cash, $60 million of convertible notes, and the issuance of approximately 5.3 million GAIN shares. This constitutes a $28 million premium above City Index's present book value as of September 30, 2014.
According to Glenn Stevens, GAIN Capital Holdings' CEO, in a recent statement on the acquisition, "The acquisition of City Index advances our growth strategy, creating scale for our retail business and accelerates the development of our innovative trading technology. The combination will result in a balanced mix of customer volume, with approximately 61% of retail volume coming from FX and 39% from CFD trading/UK spread betting in other asset classes such as equities, indices and commodities. We look forward to leveraging the City Index brand in key markets and working with the team at City Index, who share our commitment to creating a superior customer experience."
"This transaction is a landmark moment in City Index's 30-year history as a leader in retail trading. The combination of GAIN's unrivalled leadership in global foreign exchange with City Index's internationally-recognized CFD business creates a world-class industry leader, providing the scale and capability to deliver the ultimate trading experience to our clients around the world. The combined business will also offer greater opportunities for City Index's management and staff to flourish in a global business," added Mark Preston, City Index's Chairman and Chief Executive, in an accompanying statement.
In addition, the combined entity will utilize pro forma client assets of approximately $1.2 billion, coupled with trailing twelve-month revenues and adjusted EBITDA (during the period ending September 30, 2014) of $462 million and $61 million, respectively.
Finally, GAIN Capital expects to begin undergoing the aforementioned synergies and full integration over the next 18-24 months. According to a GAIN Capital statement, all clients will receive more detailed information about the benefits the combined company can offer them, upon the full completion of the acquisition.
