Shares of BGC Partners (NASDAQ:BGCP) shot up nearly 50 per cent in premarket trading Tuesday, after Nasdaq OMX Group Inc. (NASDAQ:NDAQ) agreed to buy its fully electronic trading platform in a deal worth up to $1.23 billion.
The deal was announced late Monday and will see Nasdaq acquire the platform, called eSpeed, for $750 million in cash plus an earn-out of up to $484 million of Nasdaq’s stock to be paid over 15 years – a total amount worth about equal to BGC's current fully diluted market capitalization.
The sale is expected to close sometime in mid-2013, subject to certain approvals.
"Since the formation of BGC in 2004, our business model has consisted of investing in voice-only markets; introducing the technology that, along with our brokers, creates voice, hybrid, and electronic marketplaces; and converting our hybrid markets to fully electronic trading platforms,” said BGC chairman and CEO Howard W. Lutnick.
“Today's announcement clearly demonstrates that this process ultimately leads to enormous value for our stockholders.”
Lutnick said analysts are expecting BGC to generate around $1.85 billion in revenues for 2013.
“Consequently, we think that the market was clearly under-valuing the assets of the company.”
BGC noted that its eSpeed platform, together with the directly related market data and co-location businesses, generated just under $100 million in revenues in 2012.
Bob Greifeld, Nasdaq OMX CEO, said that the eSpeed platform is viewed as "a compelling extension" of Nasdaq's strategic direction as the patform is "a major player" in the U.S. Treasury market, with 70 per cent of its revenue derived from fixed contracts.
"The acquisition furthers our stated diversification strategy, and strengthens our commitment to deliver significant value to shareholders," he added.
BGC said it will retain all of its other voice, hybrid, and fully electronic trading, market data, and software businesses, including voice, hybrid and electronic brokerage of off-the-run U.S. Treasuries, as well as Treasury Bills, Treasury Swaps, Treasury Repos, Treasury Spreads, and Treasury Rolls.
The company will also continue to offer voice brokerage for on-the run U.S. Treasuries, and has agreed not to compete with NASDAQ OMX in fully electronic, on-the-run, benchmark U.S. Treasury Notes and Bonds for three years following the close of the sale.
Shares of BGC were lately up 49.35 per cent in premarket activity, trading at $5.75, while Nasdaq's shares fell 4.28 per cent to $30.64.