Merging Knight Capital Group Inc. (KCG) and Getco LLC will generate savings of much as $110 million a year through cost reductions.
The elimination of redundancies in infrastructure and personnel will help cut expenses by $20 million to $30 million during the first year of the merger, according to a statement from Knight. Annual savings will increase to $90 million to $110 million by the third year, the company said.
The shares will be listed on the New York Stock Exchanger under a revised plan where existing stockholders can exchange three shares for one share of the combined company. The original agreement was one for one. The change, which doesn’t affect the total paid to Knight Capital’s shareholders, is aimed to meet NYSE’s requirement for a minimum share price of $4 at the time of listing, the companies said. Knight Capital closed at $3.74 on April 12.
Knight Capital agreed in December to be purchased by Getco in a $1.4 billion deal, ending its 17 years of independence. Getco, a closely held high-frequency trading company, was among six financial firms that bailed out Knight Capital in August, after trading glitches caused more than $450 million in losses and brought the company to the brink of bankruptcy.
Knight Capital said in February that it will reduce its workforce by 5 percent as it combines sales teams and discontinues its clearing business.
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