INTL FCStone Inc. announced today the acquisition of GAIN Capital Holdings, Inc. The agreement is approved by the board of directors of both companies. INTL FCStone agreed to acquire GAIN Capital for $6.00 per share in all-cash transaction, amounting to approximately $236 million in equity value. INTL FCStone also agreed to make an offer at closing to repurchase GAIN Capital’s $92 million convertible notes due 2022 as part of the transaction. $60 million convertible notes due 2020 will be repaid from GAIN Capital’s cash on hand before closing.
More than 130,000 retail and institutional investors are served through GAIN Capita’s Forex.com and City Index platforms and on other channels. The acquistion will bring GAIN Capital’s customers a richer product offering and the expanded resources. INTL FCStone in turn, will add a new digital platform to its financial ecosystem, expanding its own offering to its clients. The transaction flows is also expected to increase and raise client float by approximately 1 billion. GAIN Capital’s digital assets and experience will further advance the digitization of INTL FCStone’s platform.
Sean O’Connor, CEO of INTL FCStone, said:
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:
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.
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 remain head of the combined firm and GAIN Capital CEO Glenn Stevens will continue to lead the former Gain Capital business within INTL FCStone.
The acquisition is expected to close in the middle of 2020 after approval from regulators and GAIN Capital’s stockholders. 44% of GAIN Capital’s voting power made up from VantagePoint Capital Partners, Michael Spencer’s private investment group IPGL, and Glenn Stevens, has agreed to vote for the acquisition.
In January INTL FCStone made two other acquisitions. Just in the very beginning of the year the company acquired IFCM Commodities, GmbH and its London-bases subsidiary acquired GIROXX GmbH in Frankfurt, Germany.