GFI Board Acknowledges BGC Proposal

BGC claims its offer represents a superior proposal to CME Group's.

The board of interdealer broker GFI Group has voted to open its books to suitor BGC Partners, after the brokerage firm made an unsolicited offer to acquire it last week.

BGC announced its intent to make an all-cash tender offer on September 9 for $5.25 per share of GFI, totalling approximately $675 million, in a move that disrupted a previously announced acquisition by the Chicago Mercantile Exchange (CME) Group. That deal was for $4.55 per share.

GFI's board stopped short of recommending the offer from BGC as a superior proposal to CME's, but said that the terms allowed it to enter negotiations with the firm, subject to a confidentiality agreement.

"The Company's board of directors has not determined that the Proposal in fact constitutes a superior proposal under the existing merger agreement with CME and such Proposal is not at this stage sufficiently detailed or definitive for such a determination to be appropriate," the firm says in a brief statement. "The Company's board of directors has not changed its recommendation with respect to, and continues to support, the pending transaction with CME."

Software Business
At the heart of the wrangling between the offers is GFI's software businesses ─ Trayport and Fenics ─ which handle energy trading and foreign exchange. The original acquisition by CME Group is designed to be a two-step process, in which the exchange operator will acquire the firm, and then sell back the wholesale brokerage arm to a private consortium, including Jeff Gooch, a member of GFI's board while retaining the platforms. Gooch abstained from the vote to open the firm's books to BGC, and another board member, chief executive Colin Heffron, was not present. BGC did not refer directly to either Trayport or Fenics in its letter to GFI's board.

BGC's intervention in the agreement came 10 days after CME Group and GFI jointly announced their intentions, with the New York-headquartered firm saying that it had been pursuing a merger with GFI for some time. It said that while it was open to negotiations with the board, it would take the offer directly to shareholders, potentially turning the move hostile.

The CME Group has not released a public statement on the offer from BGC, and company representatives did not respond to requests for comment when the story broke. A spokesperson from GFI declined to comment.

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