By Liz Hoffman
BGC Partners Inc. said Thursday it is close to succeeding in a
six-month effort to buy brokerage firm GFI Group Inc., a campaign
that has inflamed competitive tensions in an obscure corner of Wall
Street.
BGC said it has "actively engaged" in takeover discussions with
GFI and expects to reach a friendly deal to acquire the company for
$6.10 a share, or about $778 million. A deal would come weeks after
GFI shareholders rejected a lower-priced sale to exchange operator
CME Group Inc.
A spokeswoman from GFI declined to comment.
BGC, run by Cantor Fitzgerald LP Chief Executive Howard Lutnick,
and CME, which runs the Chicago Mercantile Exchange and the New
York Mercantile Exchange, became locked in a bidding war over GFI
last summer.
Mr. Lutnick has been an aggressive consolidator of interdealer
brokers, which serve as middlemen helping to arrange trades for
Wall Street banks. CME, meanwhile, coveted GFI's software assets as
a way to strengthen its operations in Europe and Asia.
CME agreed in July to buy GFI for $4.55 a share in a mix of cash
and stock, and then sell the brokerage division to GFI executives,
including Chairman Mickey Gooch and CEO Colin Heffron. BGC,
however, surfaced in September with a 13.5% stake in GFI and made a
hostile bid for the rest. The two suitors traded escalating bids
over the next several months, with GFI management continuing to
back the CME deal.
In the wake of the failed CME vote, GFI has engaged in merger
talks with BGC and possible white-knight suitors, according to
regulatory filings and people familiar with the matter.
Discussions with BGC have ramped up in recent days, people on
both sides say, cautioning that it is possible no deal is
reached.
BGC has conditioned its bid on getting two-thirds of GFI's board
seats, a condition GFI's current directors--Messrs. Gooch and
Heffron and three independent directors--have resisted. BGC can
waive that requirement, but then risks finding itself with a hefty
stake but little influence.
Another potential snag, according to people familiar with the
matter: GFI executives and former employees owning about 38% of the
company are currently prevented from selling those shares to BGC,
due to an earlier agreement with CME.
BGC's tender off expired Thursday evening. Shares of GFI closed
up 0.8% Thursday at $6.05.
The bidding war has split GFI's own board, with Messrs. Gooch
and Heffron backing the CME deal while two of the three independent
directors urged a deal with BGC, according to regulatory
filings.
Interdealer brokers like GFI and BGC connect banks looking to
trade financial instruments such as derivatives. The business has
been under pressure in recent years, as banks have curbed trading
and regulators have sought more oversight over the derivatives
market.
Angela Chen contributed to this article.
Write to Liz Hoffman at liz.hoffman@wsj.com
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