BGC Bid for Rival Broker Turns Hostile

BGC initially made its offer to the firm's board on September 8, after GFI and the Chicago Mercantile Exchange (CME) Group announced a two-part acquisition by the venue operator and a management consortium on July 30. The proposal valued GFI at $5.25 per share, as opposed to the CME Group deal, which valued the firm at $4.55 per share.

GFI acknowledged the proposal on September 15, and agreed to open its books in a vote that did not include the board members who would lead the management buy-out of the firm after its acquisition by CME Group. BGC had initially warned that it would take the bid to GFI shareholders, thereby turning it hostile, if it did not receive a response.

However, a statement from BGC claims that GFI was not negotiating in good faith and employing delay tactics for critical elements necessary for it to open its books, such as a confidentiality clause. As such, the firm has now moved to take the offer directly to shareholders, and acquire the 86.5 percent of shares in GFI that it does not already own.

Crown Jewels
Both BGC and the CME Group are essentially after the two trading platforms operated by GFI ─ Trayport, which handles energy trading, and Fenics, which specializes in foreign exchange. The brokerage arm of GFI would have been bought back as part of the CME deal, and BGC was not seeking information on it during the negotiations after September 15.

The synergies for both are clear. Technology supply, in particular the provision of platforms, is increasingly a critical component within sell-side business strategy, with both exchanges and brokers seeing an uptick in revenue from their tech-focused arms following the worst years of the financial crisis.

We are disappointed that our various proposals regarding the terms of the confidentiality agreement covering the Trayport and Fenics information have been unacceptable to GFI and the management team, who have thwarted any merger negotiations. - Shaun Lynn, BGC.

BGC's offer will remain valid until 12:00pm Eastern Time on November 19, unless otherwise extended. There is no financing condition attached, and no immediate comment from GFI was released. BGC's letter to GFI's board can be found here.