If CME had got its way, the Deal of the Year for 2015 might have been its acquisition of Fenics and Trayport.
Instead, BGC Partners bought the GFI Group and Trayport is soon to be sold to CME’s arch rival, the IntercontinentalExchange.
What was to become a truly historic deal all began auspiciously with CME announcing it had agreed to acquire the GFI Group at $4.55 a share in July 2014.
For Shaun Lynn, president of BGC Partners, the news was not entirely unexpected.
“I have been friends with [GFI CEO] Colin Heffron for many years and we had talked about how the two businesses were a good fit and the need to consolidate many times,” he says.
But the conversations with Heffron had gone quiet and Lynn knew that something was up. When Heffron cancelled an upcoming dinner with Lynn at short notice, BGC knew they had to act.
A letter was sent to the GFI board outlining the benefits of a deal but events were overtaken by the announcement of the CME agreement the next day. It looked as if the deal was lost for BGC.
However, the more Lynn and BGC chief executive Howard Lutnick looked at the deal, the more they thought that it was a bad deal for GFI staff.
“We looked at what GFI Group would look like without Fenics and Trayport and it was clear it would be really stressed. We also felt the market was going to get tougher before it got better,” he says.
“We were confident that we could keep the major staff and that we would be able to clear the deal with shareholders and regulators.”
Armed with this confidence, BGC shocked the market with a rival bid for GFI on September 9 valuing the business at $5.25 a share. BGC already held a 13.5% stake in the business.
It did get heated but the important thing is that everyone emerged with something
Over the next four months, the price rose with bid and counterbid up to $6.10 followed by a nail biting tender to shareholders to sell their shares to BGC.
“It did get heated,” admits Lynn. “But we are always confident that our offer would triumph. And the important thing is that everyone emerged with something.
“Mickey Gooch is still chairman of GFI, the shareholders got more than management would have paid and GFI staff are part of a big company that is well prepared for the future.”
Combining the two businesses has “turbo-charged” BGC’s growth, Lynn says. The company went from having a $60m commodities business to a more than $200m business overnight as well as giving BGC a strong position in many new markets such as credit indices and geographies such as Spain and Israel.
With a deal to sell Trayport to ICE for $650m now agreed, BGC has recouped the majority of the $750m it paid for GFI Group and still holds the Fenics business, which it intends to hold on to for the time being and expand into other asset classes outside its core FX market.
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