Saturday 25 June 2022

INTL FCStone agrees to an all-cash acquisition of Gain Capital Holdings

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NEW YORK, U.S. — INTL FCStone Inc. (“INTL FCStone”) today announced that it has entered into a definitive agreement to acquire GAIN Capital Holdings, Inc. (NYSE: GCAP) (“GAIN”), which has been approved by the Board of Directors of both INTL FCStone and GAIN. INTL FCStone has agreed to acquire GAIN for $6.00 per share in an all-cash transaction representing approximately $236 million in equity value.

As part of the transaction, INTL intends to make an offer at closing to repurchase GAIN’s $92 million convertible notes due 2022. GAIN’s $60 million convertible notes due 2020 will be repaid from GAIN’s cash on hand prior to closing.

GAIN serves more than 130,000 retail and institutional investors through its and City Index platforms, among other channels.

As a result of the combination, GAIN’s customers will benefit from a richer product offering, and the expanded resources and greater scale of the combined firm. By acquiring GAIN, INTL FCStone, in turn, will add a new digital platform to its global financial network, significantly expanding its offering to retail clients, as well as a complementary futures business.

The acquisition is expected to increase INTL’s transaction flows and raise client float by ~$1 billion. The acquisition of GAIN’s digital assets and expertise will also accelerate the digitization of INTL FCStone’s platform.

Sean O’Connor, CEO of INTL FCStone, commented on the transaction, “By leveraging INTL FCStone’s products and services, we can enhance GAIN’s product offering to drive market share growth by capturing additional business from existing clients, as well as enable the acquisition of new clients. As a clearer, we can enhance margins on their transaction flow, and by combining the transactional flows, we believe we can increase revenue capture by internally crossing more spreads and getting better execution from markets. In addition, as a result of the elimination of GAIN’s public company costs and the consolidation of our two infrastructures, we expect to enhance our earning power.”

Glenn Stevens, CEO of GAIN commented on the transaction, “GAIN’s business fits naturally within INTL FCStone’s diversified and scaled franchise, and our shareholders will benefit from this combination by receiving a substantial premium in an all-cash transaction. GAIN was founded over 20 years ago with the intention of providing traders with low-cost access to foreign exchange markets. By joining INTL, we see an incredible opportunity to leverage their capabilities and ecosystem of products, and to deliver an even more comprehensive offering to our customers. Bringing together GAIN’s expertise in serving the retail customer and INTL’s unparalleled access to the financial markets creates an exciting value proposition and enables the combined group to serve a wider range of customers.”

Mr. O’Connor concluded, “This transaction is priced at a 12% premium to GAIN’s tangible book value and we anticipate will be immediately accretive to return on equity and earnings. We expect the cost and capital synergies of this merger will enable us to realize positive returns from the transaction even amid today’s multi-decade lows in volatility, and position us for significant upside as FX market conditions normalize. In the meantime, we believe the increase in diversity of our portfolio in terms of product and customer segments will reduce the overall volatility of our revenues.”

Sean O’Connor will continue to lead the combined firm, while GAIN CEO Glenn Stevens will continue to lead the former GAIN business within INTL FCStone.

The transaction is expected to close in mid-2020, subject to approval by GAIN’s stockholders, regulatory approvals and customary closing conditions. VantagePoint Capital Partners, Michael Spencer’s private investment group IPGL, and Glenn Stevens, representing 44% of GAIN’s outstanding voting power in aggregate, have entered into agreements to vote in favor of the transaction.

Jefferies LLC is acting as exclusive financial advisor to INTL FCStone and has provided $350 million of committed debt financing for the acquisition. DLA Piper is serving as INTL’s legal counsel, GCA Advisors LLC is acting as financial advisor to GAIN and Davis Polk & Wardwell LLP is serving as its legal counsel.

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