BGC Partners, and its majority-owned division, GFI Group – a provider of trading technologies and support services to the global OTC and listed markets – are to sell GFI’s Trayport business to Intercontinental Exchange for USD650 million.
Howard W Lutnick (pictured), Chairman and Chief Executive Officer of BGC, says: "The agreement to sell Trayport for USD650 million 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 USD650 million of the USD750 million that BGC will pay for all of GFI. This translates into BGC paying approximately USD100 million for USD640 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, says: "While Trayport provided less than 3 per cent 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 capitalisation. As the overall integration of GFI continues, we remain on target to reduce our Financial Services expense run rate by at least USD90 million by the first quarter of 2017. This USD90 million improvement in profitability will actually be more than Trayport's total annual revenues of approximately USD80 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."
Lutnick adds: "The sale of Trayport, like the sale of eSpeed in 2013 for over USD1.2 billion, demonstrates our ability and willingness to unlock the value of our assets. Both of these transactions highlight the intrinsic value embedded in our fully electronic FENICS business, which is generating almost USD250 million of annualised revenues and approximately USD105 million of annualised pre-tax distributable earnings. The USD650 million sales price for Trayport, along with the approximately USD674 million in additional Nasdaq stock we anticipate receiving over time, as well as our USD514 million of balance sheet liquidity, will give us significant resources with which to further increase shareholder value. We expect to use these funds to continue investing in both Newmark Grubb Knight Frank, our Real Estate Services company, and our Financial Services businesses, including FENICS. We will also have the capacity to repurchase shares and/or units of BGC under our USD300 million stock repurchase program, pay quarterly dividends, repay or repurchase debt, profitably hire, and/or make accretive acquisitions, all while maintaining or improving our investment grade rating."
