US electronic trading and market-making firm Virtu Financial Inc yesterday struck a deal to buy its local rival KCG Holdings Inc in a $1.4 billion deal.
Virtu has offered to pay $20 per share, a 12.7 per cent premium to KCG's Wednesday close.
Virtu plans to fund the deal through stock sale worth $750 million to private equity firm North Island and Singapore's sovereign wealth fund Temasek and borrowings of $1.65 billion from JPMorgan Securities.
The combined company will be led by Virtu CEO, Douglas Cifu.
Virtu expects to realize approximately $208 million of net pre-tax expense savings, in addition to $440 million of capital synergies.
''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 Cifu.
Virtu is a technology-enabled market maker and liquidity provider to the global financial markets.
It buys or sells securities and other financial instruments, and generates revenue by buying and selling securities and other financial instruments and earning small amounts of money on individual transactions based on the difference between what buyers are willing to pay and what sellers are willing to accept.
It markets by providing quotations to buyers and sellers in more than 12,000 securities and other financial instruments on more than 235 unique exchanges, markets and liquidity pools in 36 countries around the world.