Cowen Group is to acquire Convergex Group from private equity firm GTCR, Bank of New York Mellon and other shareholders for a total consideration, less certain closing adjustments, of USD116 million in cash and Cowen common stock.
With combined pro forma brokerage execution revenues of over USD400 million in 2016, the transaction expands Cowen’s reach to 108 countries around the globe, including China.
Cowen expects the acquisition to be accretive to economic income per share and return on tangible common equity in 2018.
Convergex is an agency-focused global brokerage and trading related services provider with a client base of 2,500 hedge funds, asset managers, broker-dealers, trusts and exchanges. Business units include equity sales and electronic trading, commission management, prime services and global clearing.
“We are thrilled by today’s announcement and welcome Convergex’s extremely talented team to Cowen,” says Jeffrey M Solomon, president of Cowen. “Together, our combined best-in-class global execution capabilities, along with Cowen’s high-quality research and corporate finance advisory services, will enable us to continue helping our clients to outperform in challenging markets. The addition of Convergex’s global platform will also establish meaningful scale for Cowen’s equities business by significantly bolstering our capabilities in prime services, commission management, algorithmic and electronic trading, as well as clearing services. We expect that our increased scale will unlock significant economic benefits for our shareholders by providing greater revenue resiliency through market cycles and improved profitability through potential cost synergies.”
Eric W Noll (pictured), president and chief executive officer of Convergex Group, says: “This strategic transaction is an exciting opportunity for both our clients and our employees. Convergex has grown significantly as an agency-focused provider of execution services and trading technology partner. The ability to combine with a great research based firm like Cowen, which has complementary businesses with minimal client overlap, creates a tremendous opportunity for our people and our clients. By forging this combination with enhanced experience and expertise, our respective clients will now have access to a wider array of global offerings and innovative solutions.”
The transaction price will be adjusted based on the tangible book value of Convergex at time of closing. The majority of the transaction is to be conducted through cash on Cowen’s balance sheet and excess cash from Convergex at closing, with the remainder consisting of Cowen common stock based on a 30 day trailing VWAP. The final mix is to be determined at closing by Cowen and the transaction is expected to close by the end of the second quarter 2017, following customary closing conditions and regulatory approvals.
The Convergex transaction is not contingent on the closing of the terms of the strategic partnership between Cowen and China Energy Company, announced on 29 March 2017.
