BGC and GFI to sell to ICE

BGC Partners, a global brokerage company servicing the financial and real estate markets, reports that its GFI subsidiary has agreed to sell its UK-domiciled Trayport business to Intercontinental Exchange for $650 million.

Howard W Lutnick, chairman and CEO of BGC, said: “The agreement…clearly demonstrates the value that this leading platform provides to the global energy and commodities markets. This is a business that has counted both BGC and GFI as customers for many years, and we expect to continue to use it for the foreseeable future.

“While in many ways we would have benefited from continuing to own Trayport, the proposed transaction is the most direct way for us to unlock value for our shareholders. Indeed, one of the main reasons that BGC pursued GFI was the expectation that the sale of Trayport would dramatically lower the price and risk involved with respect to purchasing the rest of GFI’s businesses. The proposed sale price represents $650 million of the $750 million that BGC will pay for all of GFI. This translates into BGC paying approximately $100 million for $640 million of GFI’s remaining revenues, or a multiple of just 0.16 times sales. Therefore, we expect the GFI transaction to produce enormous value for BGC’s investors.”

Shaun D Lynn, president of BGC, added: “While Trayport provided less than 3 percent of BGC’s consolidated revenues in the third quarter of 2015, the consideration we will receive represents approximately 20 percent of BGC’s fully diluted market capitalization. As the overall integration of GFI continues, we remain on target to reduce our financial services expense run rate by at least $90 million by the first quarter of 2017. This $90 million improvement in profitability will actually be more than Trayport’s total annual revenues of approximately $80 million, and more than double Trayport’s pre-tax earnings. Therefore, we expect to make the company much more profitable going forward, even before we invest the proceeds from this sale.”

The transaction is subject to certain closing conditions, including receipt of required regulatory approvals. The transaction is expected to close as early as the first quarter of 2016, subject to receipt of such approvals. After the close of the transaction, BGC and GFI are expected to remain customers of Trayport.

The net tax the company will pay with respect to the transaction is expected to be at a rate of 15 percent or less. The one-time gain will be reflected in BGC’s consolidated results under US generally accepted accounting principles, but will be excluded from the company’s results for distributable earnings.

Cantor Fitzgerald served as the company’s financial adviser. BGC Partners’ legal adviser was Wachtell, Lipton, Rosen & Katz. ICE’s financial adviser was Goldman, Sachs & Co. and its legal adviser was Shearman & Sterling LLP.