(By Balaseshan) Knight Capital Group Inc. (NYSE: KCG), a global financial services firm, said it has agreed to be bought by GETCO Holding Co. LLC for about $1.4 billion. Following the news, shares of KCG gained 8.11% in premarket.
The $1.4 billion purchase price represents a 51% premium to Knight's closing share price on November 23. The amount also equates to a 15% premium to Knight's tangible book value, as of September 30, 2012.
Under the agreement, existing Knight shareholders (other than GETCO) will have the right to elect to receive $3.75 per share in cash or one share of common stock of the new holding company. The cash consideration will be subject to pro-ration if the holders elect to receive more than $720 million in cash in the aggregate.
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Jefferies & Co. Inc. (NYSE: JEF) and its affiliates, the largest shareholders in Knight, have agreed to limit their cash election to 50% of their Knight shares to the extent it is necessary to ensure that other Knight shareholders can receive their desired cash level up to $720 million.
GETCO members will receive 233 million shares of the new holding company and the 57 million shares of Knight currently owned by GETCO will be retired. GETCO members will receive warrants in the new holding company as follows: 25 million warrants with a $4.00 exercise price and a four-year term; 25 million warrants at a $4.50 exercise price and a five-year term; and 25 million warrants at a $5.00 exercise price and a six-year term.
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GETCO has obtained commitments from affiliates of Jefferies for the financing necessary to complete the transaction, including refinancing all existing Knight and GETCO debt. General Atlantic will make an additional $55 million equity investment, which will bring their total investment in the new company to over $400 million.
The transaction is expected to be completed in the second quarter of 2013, subject to shareholder and customary regulatory approvals.
KCG closed Tuesday's regular session at $3.33. The stock has been trading between $2.24 and $13.59 for the past 52 weeks.