BGC Further Extends GFI Offer Deadline

Previously, BGC had extended the deadline from November 19 to December 9. The offer has so far attracted approximately 12.4 million shares, according to BGC.

"We remain confident in the strategic merits of the transaction and we are continuing to evaluate our options," says Howard Lutnick, chairman and CEO at BGC. "Our $5.25 per share all-cash offer remains superior to the CME's stock-and-cash proposal, and by being in a position to close without any regulatory impediment, we are able to provide GFI shareholders with the immediate liquidity to which they are entitled. We urge shareholders to tender their shares."

BGC's offer is for $5.25 per share in an all-cash transaction, designed to be a superior proposal to that given by the Chicago Mercantile Exchange (CME) Group in the summer, which initially had a price of $4.55 per share and was a part-cash, part-stock transaction that came in two steps.

First, GFI would be merged with a CME subsidiary. Then a consortium of buyers led by the current management of the broker would buy back the brokerage business, leaving CME with the Trayport and Fenics technology businesses.

Battle Lines
For a while, it seemed as if BGC might succeed in disrupting the agreement between CME and GFI, which was announced on July 29. However, a tortured process followed where the two brokers fell out over confidentiality agreements after GFI said it would open its books.

Questions still persist over whether BGC can complete on the deal, and the long-term effect this might have on the interdealer broker landscape, which is ripe for consolidation.

A special committee of independent directors of GFI, formed to investigate BGC's offer further, later rejected it, citing their pessimism over the possibility of completing the deal.

By this point, the bid had become hostile, and BGC had presented its offer directly to shareholders, later extending its first deadline as previously mentioned.

It had something of a narrow escape from regulatory sanction when the UK Financial Conduct Authority (FCA) decided that it would not pursue criminal or civil charges against the firm for not seeking approval before it raised its stake in GFI to 13.5 percent. Under UK law, regulated firms must seek approval before they take a position of over 10 percent in rival companies.

In third-quarter earnings calls, senior executives from BGC were bullish in their defense of the offer, saying they were very serious about it. A press release issued with the first extension of the deadline also intimated that the firm was in positive discussions with the special committee, and mused that it might reach a scenario where those directors would throw their weight behind the deal.

The Twist
But then CME threw oil on the fire by raising its offer to $5.25, matching BGC's, although the latter's remains an all-cash transaction. BGC issued a statement saying that its offer still represents a superior proposal, and pointed to the fact that it had secured committed financing and regulatory approvals.

However, GFI's board remains firmly behind the proposal, and as one of the investment vehicles of certain board members, Jersey Partners, controls roughly 40 percent of GFI, the battle for the broker is an uphill one for BGC.

Questions still persist over whether BGC ─ by far the larger broker of the two, with a nearly $2 billion market capitalization versus GFI's $691 million ─ can complete on the deal, and the long-term effect this might have on the interdealer broker landscape, which is ripe for consolidation.

Shares in GFI Group were trading up at market close on Nasdaq yesterday, at $5.42. BGC was also trading up, at $9.04.