FXCM Want to Acquire Gain Capital

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I received a message in my inbox this morning advising me that:

FXCM Proposes Acquisition of Gain Capital

According to the accompanying press release FXCM sent a letter to the members of GAIN's Board of Directors last night:

To inform them of FXCM's desire to reach agreement on a transaction that would create the industry leader in online FX trading.

According to FXCM CEO Drew Niv:

FXCM believes that the substantial potential operating and capital synergies between the two companies would result in an accretive deal with a strong growth profile and improved economies of scale. Additionally, FXCM believes customers of both FXCM and Gain will greatly benefit from the expected improvement of financial strength and stability of the combined entity.

This proposed merger is the highest priority for FXCM, and we hope that Gain is as excited as we are about the potential a combined company could have.

It remains to be seen how excited GAIN Capital's shareholders are about the proposed deal, but a comparison between the two companies stock price charts tells a large part of the story. Here is a NinjaTrader chart combining the two:

FXCM versus GAIN weekly chart on April 9th 2013

FXCM versus GAIN weekly chart before the NYSE open on April 9th 2013

As you can see, Gain's shareholders can't be too happy about the post IPO performance of their investment which is now down to around half the IPO price of $9.00 per share. On the other hand investors in FXCM are almost back to where they started at $14.00 per share. According to FXCM once again:

The proposed transaction would give Gain shareholders 0.3996 shares of FXCM Class A common stock for each share of Gain common stock. Based on FXCM's closing price of $13.39 on Monday, April 8, 2013, this results in an offer price of $5.35 per share of Gain common stock, which in aggregate would represent $210.4 million in total value. This price represents a 25% premium to Gain's closing share price on April 8, 2013. FXCM is also prepared to offer up to $50 million in cash consideration in lieu of FXCM shares.

FXCM are holding a conference call at 8:15 a.m. (EST) this morning to reinforce their message. Do you suppose GAIN's shareholders will find the bait sufficiently tempting?

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April 10, 2013

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