FXCM Proposes Acquisition of Gain Capital
Combined Company Expected to be Accretive to All Parties
Conference Call Scheduled for 8:15 a.m. on Tuesday, April 9, 2013
Proposed Acquisition Highlights:
*Would create an industry leader with potentially significant benefits of
improved scale economics
*Pro forma 2012 revenues of ~$569 million, client assets of ~$1.6
billion^(1) and estimated post-synergy run-rate Adjusted EBITDA of between
~$163 and ~$183 million^(2)
*Potential significant operating synergies which can potentially drive
between $50 and $70 million in incremental run-rate EBITDA once
integration is complete
*Potential capital synergies could result in the release of between $80 and
$100 million in currently restricted cash
*Projected to be accretive in 2014 after excluding one-time restructuring
NEW YORK -- April 8, 2013
FXCM Inc. (“FXCM”) (NYSE: FXCM), a leading online provider of foreign
exchange, or FX, trading and related services, today announced it is proposing
to merge with and acquire Gain Capital Holdings LLC (“GAIN”) (NYSE: GCAP).
The proposal was communicated this evening in a letter from FXCM to Gain’s
Board of Directors, to inform them of FXCM’s desire to reach agreement on a
transaction that would create the industry leader in online FX trading.
“FXCM believes that the substantial potential operating and capital synergies
between the two companies would result in an accretive deal with a strong
growth profile and improved economies of scale,” said Drew Niv, CEO of FXCM.
“Additionally, FXCM believes customers of both FXCM and Gain will greatly
benefit from the expected improvement of financial strength and stability of
the combined entity.”
“This proposed merger is the highest priority for FXCM, and we hope that Gain
is as excited as we are about the potential a combined company could have.”
The proposed transaction would give Gain shareholders 0.3996 shares of FXCM
Class A common stock for each share of Gain common stock. Based on FXCM’s
closing price of $13.39 on Monday, April 8, 2013, this results in an offer
price of $5.35 per share of Gain common stock, which in aggregate would
represent $210.4 million in total value. This price represents a 25% premium
to Gain’s closing share price on April 8, 2013. FXCM is also prepared to offer
up to $50 million in cash consideration in lieu of FXCM shares.
^1 Pro forma figures exclude transaction fees and other expenses associated
with the proposed transaction.
^2 FXCM Adj. EBITDA excludes certain items relating to the IPO of FXCM and
other one-time charges and non-recurring items.
FXCM will host a conference call to discuss the proposed business combination
at 8:15 a.m. (EST) tomorrow. This conference call will be available to
domestic participants by dialing 877.303.9132 and 408.337.0136 for
international participants. The conference ID number is 34133919.
A live, audio webcast, a copy of FXCM's presentation and replay of this
conference call will also be available at http://ir.fxcm.com/.
The full text of the letter issued by FXCM to Gain’s Board of Directors
April 8, 2013
Board of Directors
GAIN Capital Holdings, Inc.
135 Route 202/206
Bedminster, New Jersey 07921
Attention: Peter Quick, Chairman
Attention: Glenn Stevens, Chief Executive Officer
Dear Members of the Board:
I am writing to you, on behalf of the Board of Directors of FXCM Inc.
(“FXCM”), to make a proposal for a merger with GAIN Capital Holdings, Inc.
(“GAIN”). Under our proposal, we would be prepared to offer 0.3996 shares of
FXCM Class A common stock for each share of GAIN common stock (the
“Proposal”). Based on FXCM’s closing price as of April 8, 2013 of $13.39, our
Proposal represents an offer price of $5.35 per GAIN share, which in aggregate
would represent $210.4 million in total value^(1). Our Proposal would entitle
GAIN’s shareholders to approximately 15.7 million shares of FXCM Class A
common stock, or a 16.2% ownership interest in the combined company. Depending
on the preferences of your shareholders and their potential desire for
immediate liquidity, we would be prepared to include consideration of $50
million of cash in lieu of stock. Our Proposal is not subject to any financing
Our Proposal represents a 25% premium to GAIN’s closing stock price of $4.27
as of April 8, 2013^(1), and exceeds GAIN’s 52-week high^(2) of $5.31 on April
27, 2012. We believe that, based on various financial and operating metrics
outlined in more detail in the attached slide presentation (the
“Presentation”), the Proposal represents an attractive value proposition for
your shareholders. Moreover, we believe the substantial operating synergies,
capital efficiencies, expanded operating scale, and improved trading
characteristics of the combined company present a compelling rationale for
this transaction and an attractive opportunity for potential future
appreciation in value for GAIN shareholders.
Substantial Operating Synergies: As outlined on slide 11 of the Presentation,
we believe our overlap of products, target markets, and regulatory
requirements create a unique opportunity to potentially realize material
synergies through a merger. The regulatory requirements of maintaining a
presence in the world’s major FX markets create high fixed costs for brokers –
by combining businesses, these fixed costs can be leveraged over a larger
revenue base. We estimate that when integration is complete, synergies could
potentially drive in excess of $50 million in incremental run-rate EBITDA per
Capital Efficiencies: We believe the combined entity could also potentially
realize significant balance sheet and regulatory capital efficiencies. As
outlined on slide 12 of the Presentation, we believe that a significant amount
of GAIN’s cash currently restricted as regulatory capital and designated as
collateral for trading partners could be freed up and deployed to further
enhance shareholder value.
Operating Scale: It is our strong view that scale is critical to success in
financial services and especially so in the global FX business, where fixed
costs and capital requirements are high and increase with every regulated
jurisdiction in which a firm has a presence. We believe that brokers with
operating scale enjoy consistently higher margins, lower costs with trading
partners and higher returns on equity. Slide 25 of the Presentation
illustrates this in a comparison of key metrics of comparable firms including
As illustrated in the Presentation, we believe that the combined company would
enjoy several enhanced attributes of our business model, and that GAIN’s
shareholders would benefit significantly by participating in the combined
company. In particular, we believe that:
*Increased, operating scale enables us to maintain / grow trading volume
and deliver more consistent results despite significant drops in
*International diversity has helped us mitigate the impact of changes in
local regulations of any one particular key market, and that diversity
plus our agency model mitigates exposure to potential adverse regulatory
changes in the US market in particular
Attractive Trading Characteristics: We believe our Proposal offers GAIN
shareholders the opportunity to hold shares with improved trading
characteristics, including greater liquidity, more extensive research
coverage, fewer institutional investor limitations, and better correlation
with the positive performance of the business. With wider research analyst
coverage, average daily dollar trading volume over 8x the average volume of
GAIN, and a broader institutional investor base, we believe our proposed
exchange of FXCM shares for GAIN shares provides GAIN shareholders with an
immediate tangible benefit.
In summary, we believe our Proposal presents GAIN’s shareholders with the
opportunity to exchange their GAIN shares for a share in a combined business
with significant potential for upside from synergies and scale economics;
multiple capital efficiencies; better protection against market and regulatory
challenges; and potential for expanded liquidity to realize value in this
transaction or at points in the future.
We have engaged Barclays and Financial Technology Partners as our financial
advisors and Simpson Thacher & Bartlett LLP as legal counsel. We have
completed an extensive, thorough analysis of GAIN’s publicly available
information. We do not believe that there are significant regulatory or other
impediments to the consummation of the proposed transaction. Our Proposal is
subject to the negotiation of a definitive merger agreement. Given our high
level of familiarity with the retail FX space and GAIN, we would need only to
conduct limited confirmatory due diligence and we are prepared to devote a
cross-functional team of senior managers to this important project.
We believe that a merger of our two companies would create an industry-leader,
allowing our shareholders to be part of a larger, stronger organization. This
merger is the highest priority for FXCM and has the unanimous support of our
Board of Directors and management team.
We aim to work together with you and the rest of GAIN’s Board to work through
the details of our Proposal. We want to ensure that all of our shareholders
are aware of the opportunity to participate in the combined company and are
therefore publicly releasing the contents of this letter.
My team and I are available to meet with you, your management team and your
Board as soon as practicable to discuss the terms and merits of our Proposal.
We look forward to hearing from you soon and working with the GAIN team to
advance the best interests of our respective companies and hope that you will
be as excited as we are about the benefits of this proposed combination.
^(1) Assumes 39.3 million total GAIN shares outstanding, including 35.5
million basic shares outstanding, 2.2 million shares of restricted stock and
1.6 million shares due to exercisable options. Also assumes 81.6 million fully
diluted FXCM shares outstanding.
^(2) Based on historical closing prices.
/s/ Drew Niv
Chief Executive Officer
55 Water St, 50^th Floor
New York, NY 10041
CC: Board of Directors, GAIN Capital Holdings, Inc.
The supplemental slide presentation referenced in the letter above will be
available on the SEC website (http://www.sec.gov) as well as on FXCM’s
Investor Relations website (http://ir.fxcm.com/) tomorrow April 9, 2013
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which reflect FXCM’s current views with respect to,
among other things, its operations and financial performance for the future.
You can identify these forward-looking statements by the use of words such as
“outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,”
“should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,”
“estimates,” “anticipates” or the negative version of these words or other
comparable words. Such forward-looking statements are subject to various risks
and uncertainties. Accordingly, there are or will be important factors that
could cause actual outcomes or results to differ materially from those
indicated in these statements. FXCM believes these factors include but are not
limited to evolving legal and regulatory requirements of the FX industry, the
limited operating history of the FX industry, risks related to the protection
of its proprietary technology, risks related to its dependence on FX market
makers, market conditions , risks related to the proposed transaction
involving FXCM and Gain, which include, but are not limited to, the risks that
the proposed transaction may not be completed; that, if completed, the
businesses of FXCM and Gain may not be combined successfully or that such
combination may take longer, be more difficult, time-consuming or costly to
accomplish than expected; that the expected synergies from the proposed
transaction may not be fully realized or may take longer to realize than
expected and those other risks described under “Risk Factors” as such factors
may be updated from time to time in FXCM Inc.’s most recent annual report on
Form 10-K, FXCM Inc.’s quarterly reports on Form 10-Q and other SEC filings,
which are accessible on the SEC’s website at sec.gov.
These factors should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are included in this
press release and in our SEC filings. FXCM undertakes no obligation to
publicly update or review any forward-looking statement, whether as a result
of new information, future developments or otherwise.
Any information concerning Gain contained in this release has been taken from,
or is based upon, publicly available information. Although FXCM does not have
any information that would indicate that any information contained in this
release that has been taken from such publicly available information is
inaccurate or incomplete, FXCM does not take any responsibility for the
accuracy or completeness of such information.
Important Legal Information
This press release does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. This
press release is being made in respect of the business combination transaction
with GAIN proposed by FXCM, which may become the subject of a registration
statement filed with the SEC. This press release is not a substitute for any
prospectus, proxy statement or any other document which FXCM may file with the
SEC in connection with the proposed transaction. INVESTORS ARE URGED TO READ
ANY SUCH DOCUMENTS REGARDING THE PROPOSED TRANSACTION THAT ARE FILED WITH THE
SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Such
documents would be available free of charge at the SEC’s website
(http://www.sec.gov) or at FXCM’s website (http://www.fxcm.com) by following
the link to “Investor Relations” and then under the tab “Financial Information
– SEC Filings”.
FXCM and its directors and executive officers may be deemed to be participants
in any solicitation of proxies in respect of the proposed transaction with
GAIN. Neither FXCM nor any of its directors or executive officers beneficially
own any shares of common stock of Gain. Additional information regarding
FXCM’s directors and executive officers is available in FXCM’s proxy statement
for its 2012 annual meeting of stockholders, which was filed with the SEC on
April 30, 2012. Other information regarding potential participants in any such
proxy solicitation and a description of their direct and indirect interest, by
security holdings or otherwise, will be contained in any proxy statement filed
in connection with the proposed transaction.
About FXCM Inc.
FXCM Inc. (NYSE: FXCM) is a global online provider of foreign exchange, or FX,
trading and related services to retail and institutional customers world-wide.
At the heart of FXCM's client offering is No Dealing Desk FX trading. Clients
benefit from FXCM's large network of forex liquidity providers enabling FXCM
to offer competitive spreads on major currency pairs. Clients have the
advantage of mobile trading, one-click order execution and trading from
real-time charts. FXCM's U.K. subsidiary, Forex Capital Markets Limited,
offers Contract for Difference (“CFD”) products with no re-quote trading and
allows clients to trade oil, gold, silver and stock indices along with FX on
one platform. In addition, FXCM offers educational courses on FX trading and
provides free news and market research through DailyFX.com.
Trading foreign exchange and CFDs on margin carries a high level of risk, and
may not be suitable for all. Please read the full disclaimer at
For Investors and Media:
Jaclyn Klein, 646-432-2463
Vice-President, Corporate Communications and Investor Relations
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