Knight Capital Group (NYSE: KCG) today confirmed it has agreed to merge with Getco Holding Company in a deal valued at $1.4 billion.
Under the cash and stock transaction, shareholders will have the opportunity to receive $3.75 per share, the companies said. The two entities will be combined under a new publicly traded holding company with Getco CEO Daniel Coleman to become CEO of the combined firm.
Knight Capital is the parent company of Urban Financial Group, the largest wholesale reverse mortgage lender in the nation. Sources within the company have indicated there will be no immediate change for the lender and that it is operating business as usual.
The deal closes an ongoing recovery phase for Knight, which experienced a trading loss amounting to $440 million in August. A short list of Wall Street peers including Getco came to Knight’s rescue following the loss, extending capital to keep the company afloat.
“The transaction provides near-term certainty in the form of cash, while also allowing shareholders to benefit from participation in the future success of the firm,” said Tom Joyce, Knight’s Chairman and CEO. “Broker-dealers and institutions will continue to experience the same industry-leading execution quality and client service they’ve come to expect from Knight, with the additional liquidity-enhancing capabilities of GETCO’s renowned technology.”
Chicago-based Getco focuses in high-frequency electronic trading and says the deal will benefit its capital base.
“Market participants will benefit from industry-leading services, and our larger capital base will provide strong support for existing operations, as well as an attractive currency for growth,” said Getco CEO Daniel Coleman. “We are looking forward to bringing the talented employees of both companies together and beginning to realize the full potential of the combined organization.”
Getco and competing bidder Virtu had entered into a bidding showdown in recent weeks with Virtu offering an all-cash deal. Getco reportedly upped its offer from $3.50 per share to $3.60 per share Tuesday before landing on the final bid.
Written by Elizabeth Ecker