Virtu Financial to Acquire Independent Broker ITG For $1 Billion

High-speed trading firm Virtu Financial, Inc., has struck a deal with Investment Technology Group (ITG) and will be acquiring the firm in a deal worth around $1 billion, ITG said on Wednesday.

As part of the agreement, Virtu will buy all outstanding shares of ITG’s Common Stock for $30.30 per share in cash. This represents a premium of 9 percent to the stock’s Tuesday closing price.

The transaction is expected to close during the first half of 2019, once all regulatory approval has been received. For the deal, JP Morgan is serving as the financial advisor. Wachtell, Lipton, Rosen & Katz are providing legal counsel to ITG

Rumors of the acquisition first popped up in October when Virtu and ITG were in talks, but no concrete deal had been made. This saw ITG shares spike to their highest levels since April of 2015.

Today in premarket trading, Virtu’s shares rose 6.5 percent to reach $26.24. In the same session, shares of ITG were trading flat, despite the company also reporting better than expected third-quarter profit.

Commenting on the deal, Minder Cheng, Chairman of the Board of Directors for ITG, said: “ITG has made tremendous progress in executing on its Strategic Operating Plan over the past two years, and the agreement with Virtu is a result of the dedicated efforts of our management team and employees."

“After careful consideration, ITG’s Board of Directors determined that the proposal from Virtu, which provides an immediate and significant cash premium, offers the most value for ITG stockholders. The combination of Virtu and ITG will create an industry-leading financial technology franchise with true global capabilities and scale.”

ITG Profits Beat Market Expectations

Earlier today, ITG published its financial results for the third quarter ended September 30, 2018. During the period the broker managed to beat profit expectations, with net income coming in at $0.2 million or $0.01 per diluted share.

This is in comparison to the same time period last year, which experienced a net loss of $3.6 million or $0.11 per diluted share. Revenue was also up on a yearly basis, increasing by around five percent from $114.5 million in Q3 2017 to reach $120.8 million in the third quarter of 2018.

ITG President and Chief Executive Officer, Frank Troise, added: “our Strategic Operating Plan has delivered clear results, with increased revenues and improved profitability as compared to the third quarter of 2017."

“The investments we made in people and technology to deliver best-in-class solutions over the past two years have enhanced capabilities in our core business areas of execution, Liquidity , Analytics and workflow technology. This morning’s agreement reflects the strength of our franchise, and is a result of the hard work, commitment, and innovation of the ITG team.”

Virtu Financial Q3 Results

Virtu also published its third quarter results today, with net trading income coming in at $235.7 million. This is up by more than 13 percent when compared to the same quarter last year, which had a net trading income of $203.9 million.

Total revenues for the third quarter was $295 million. This is eight percent more than Q3 of 2017, which achieved a total revenue of $271.3 million.

Douglas Cifu, Chief Executive Officer of Virtu Financial, commented: “our third quarter results reflected a market characterized by lower volume and muted volatility; however, we performed in-line with opportunities in Q3 and we have seen a substantial uptick in volumes and volatility in the first month of Q4."

“In particular, since building and rolling-out a single technology platform around our Virtu Execution Services business in late summer, we have seen a sharp increase in this business whose results are less volatile than our market making business.”