The transaction calls for Chicago-based CME Group to sell GFI’s wholesale brokerage and clearing unit to a group of managers led by Michael Gooch, GFI’s executive chairman, for $165 million plus the assumption of $63 million in liabilities. The $4.55-a-share price that CME Group is paying for GFI represents a 46 percent premium to yesterday’s closing price, according to a statement today.
The owner of the Chicago Mercantile Exchange and New York Mercantile Exchange is bolstering its presence in Europe through the acquisition, months after opening a market in the region following several delays. GFI’s Trayport division is instrumental in connecting energy traders across the continent, said Michael Cosgrove, a New York-based partner in Vectra Capital LLC, a trading firm.
“Trayport is the rebar in the trading infrastructure over there,” said Cosgrove, who sold Amerex Brokers LLC to GFI in 2006. He left GFI in 2012. “It’s hard to crack into that, they have such a well-entrenched position,” he said.
CME Group competitor Intercontinental Exchange Inc. owns Europe’s largest energy market. ICE, as the company is known, offers trading in crude oil, natural gas and other energy products. Both CME Group and ICE offer futures trading in West Texas Intermediate crude oil, known as WTI, and Brent crude oil, which sets the price of oil outside the U.S.
“Trayport should give CME potentially good client connections in order to strengthen its energy franchise,” said Michael Wong, an analyst at Morningstar Inc. based in Chicago. CME has “traditionally been much stronger in WTI, while ICE has been stronger in Brent, which is the more seaborne or international type of oil benchmark.”
CME Group is also keeping GFI’s Fenics unit, which offers customers a price discovery tool for currency derivatives.
“European energy markets are de-regulating, and the regional demand for risk management in the sector is very high and growing,” Terry Duffy, CME Group’s chairman and president, said in today’s statement.
Shares of New York-based GFI surged 43 percent to $4.46 at 11:32 a.m. New York time, while CME Group gained less than 0.1 percent to $75.51.
Including assumed debt, CME Group valued the purchase at about $820 million. CME Group said it expects the purchase of GFI and the sale of its wholesale division to be completed in 2015.
Barclays Plc served as financial adviser to CME Group on the deal while Jefferies Group LLC worked with GFI, according to the statement. Greenhill & Co. was the financial adviser for the special committee of GFI Group directors that reviewed the deal.
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