Virtu Financial buys KCG Holdings for $1.4 billion
High-frequency trading company Virtu Financial Inc., listed on the Nasdaq, achieved an agreement to acquire KCH Holdings Inc., a peer also based in New York City, to add "client franchises in and independent agency execution," according to a statement released on Thursday. The cash transaction of $20 per share or $1.4 in total will increase earnings per share up to 25% from $208 million of net pre-tax expense savings and $440 million in synergies, the management estimates.
The takeover and debt refinancing will be funded by borrowing $1.65 billion and the sale of $750 million of common stock. Virtu said it is planning to establish a unique platform. "KCG fits perfectly with Virtu’s strategic priorities to apply our market making and technological expertise to customer wholesale order flow and expand Virtu’s growing agency execution business by offering clients a combination of Virtu and KCG’s superior algorithms and proprietary analytical tools. In addition, there is immediate opportunity for revenue growth and significant cost savings," said Douglas A. Cifu, Virtu’s chief executive.
The transaction should be executed in the third quarter, pending a green light from the target entity's shareholders and the regulators. KCG, traded on the New York Stock Exchange, jumped 11.22% to $19.73, while Virtu rallied 9.7% to $16.4 per share.