High Speed Trader Virtu Expands Reach With $1.4B KCG Buy

Owen Stevens
April 21, 2017

Virtu has had its eyes on KCG since 2012, when KCG's predecessor experienced a massive trading loss due to a computer glitch.

The company earned $1.34 per share during the first three months of 2017, down from a $1.45 per share profit during the same quarter a year ago but still exceeding the Capital IQ consensus by $0.07 per share.

Virtu Financial, the high-speed trading firm, just announced a deal acquire KCG Holdings in an all cash transaction deal for $1.4 billion.

At a price of 20 Dollars per share, the deal is at a premium of 12.7% over the closing price on Wednesday, when the deal was announced.

The deal comes at a hard time for high-frequency traders, which use powerful computers to buy and sell securities in fractions of a second. Virtu is leaner, with just 148 employees as of December 31 compared with KCG's staff of 952, according to the firms' financial reports.

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Virtu makes markets in 36 countries and 12,000 financial instruments, continuously quoting buy and sell prices for others to trade against, profiting off the bid-offer spread, using high-frequency trading (HFT) strategies.

The tie-up that will create an electronic trading giant responsible for around one-fifth of volume in United States equities. Virtu plans to fund the deal by borrowing $1.65 billion and with the sale of $750 million worth of its stock at $15.60 a share, which is 4.3% above Wednesday's closing price of $14.95.

The combined company will be led by Cifu. It is expected to close in the third quarter.

JPMorgan Securities LLC will provide up to $1.65 billion of debt financing for the deal.

Other reports by VgToday

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