GAIN Capital Holdings, Inc. (GCAP) announced that it has signed a definitive agreement to acquire Global Futures & Forex, a provider of retail Forex and derivatives trading with offices in London, Singapore, Tokyo, Sydney and Grand Rapids, Michigan. Both companies will initially retain their separate brand identities.
Founded in 1997, GFT offers Forex, CFDs, spread betting, binaries and FX options primarily through its proprietary Dealbook?® platform. GFT has built an extensive network of partners throughout the world that accounted for over 75% of GFT's retail trading volume in 2012.
The strong partnership with GFT complements GAIN's market-leading retail brand, FOREX.com. The combined company will source approximately 52% of its retail volume from partners, with the remaining 48% coming from direct retail clients. In addition, GFT's growing Sales Trader business, which accounted for approximately 40% of GFT's total trading volume in 2012, fits well with GAIN's institutional execution desk, providing a substantial opportunity to expand the company's institutional business.
The purchase price of the transaction is approximately $107.8M which, including $80M of GFT cash at closing, results in a net purchase price of $27.8M. The purchase price will be paid with $40M in cash, a five-year $40M seller note and the issuance of approximately 4.9 million shares of GAIN common stock. The purchase of GFT is expected to be completed later this year, pending regulatory approval.
Forex Consolidation
Gain's acquisition of GFT is the latest example of consolidation in the spread betting industry, which has been hit by rising costs and lower trading volumes as market volatility has declined. It follows closely FXCM's acquisition of a 50.1% controlling interest in Faros Trading LLC ("Faros"), a global leader in market coverage and execution services to the institutional foreign exchange market and FXCM's recent announcement of its takeover of the retail client accounts of Alpari's US.
The deal with GFT would further bolster Gain's Forex trading offering, following its purchase of City Index's US retail Forex business in February of this year.