Bond trader Cantor Fitzgerald is combining its electronic brokerage eSpeed, which has been a takeover target, with its BGC Partners inter-dealer broker into a new publicly listed company in a $1.3 billion (969 million euro) deal.
The deal is structured as a takeover of BGC by eSpeed , and the companies said on Wednesday that by acquiring BGC, eSpeed will be able to develop new products more effectively and benefit from a larger capital base.
"We believe that the combined company will generate greater revenue opportunities by applying technology to improve voice broker productivity, while accelerating the pipeline from voice to fully electronic trading," BGC Chief Executive Lee Amaitis said.
ESpeed will issue about 134 million shares of stock and rights, with its shares valued at $9.75 (7.27 euros) a share, a 6.1% premium to where they closed on Tuesday.
BGC will withdraw its initial public offering proposal as a result of the deal.
U.K.-based inter-dealer broker Tullett Prebon approached eSpeed about a possible takeover in April, but eSpeed and Cantor rejected the offer, angering some of eSpeed's activist investors.
Howard Lutnick, the chairman, CEO and president of eSpeed, will be chairman and co-CEO of the new company, which will be called BGC Partners, with Amaitis as his co-CEO.
The combined company's projected revenue for 2007 is about $1 billion, and expected to gain more than 12% in 2008. It is also expected to generate a pre-tax profit margin of about 13% and an effective tax rate of no higher than 27% after the effects of a net operating loss carry-forward.
Deutsche Bank and Cantor Fitzgerald advised BGC and Cantor while eSpeed's board was advised by Sandler O'Neill + Partners.