GFI Group Acquires Trading Technology Vendor
February 11, 2008
Interdealer brokerage GFI Group has acquired privately owned Trayport, a London-based provider of trading platforms, for about GBP84 million ($164 million), the companies announced on Feb. 1. GFI has been a Trayport customer since 2000.
Trayport, which is a leading provider of technology to the European over-the-counter energy markets and counts interdealer brokers Icap and Tullett Prebon and single-stock futures exchange OneChicago among its customers, will operate as an independent entity, in that "it has many independent clients for its services, but, in terms of GFI becoming Trayport's biggest customer, the technology will be integrated into our organization," said Michael Gooch, chairman and CEO of New York-based GFI.
"We're already using the Trayport technology widely, so the opportunity to integrate it into our other marketplaces has great potential," said Gooch. The deal will allow GFI's products and services to be "fully integrated into the desktop, middle office and back office of our European energy customers." He added that the technology will help GFI to streamline the introduction of new product offerings.
GFI, which paid GBP75 cash in the transaction, and another GBP9 for excess working capital, said that it financed the deal with a $60 million private placement. The broker expects that the transaction will be neutral to its 2008 earnings and accretive the following year.
Edmund Hor, managing director and founder of Trayport, explained that his company had rejected many offers in the past, noting that "a successful deal would have to address the needs of the business and the staff as well as the shareholders." He added that "GFI recognizes both the technology we produce and the business we have built. The technology remains as widely available as ever while we look forward to growing in new regions and asset classes more quickly than we could have as an independent business."
"The Trayport acquisition makes perfect sense for GFI," said Laurie Berke, senior consultant with New York-based Tabb Group. "Global interdealer brokers are moving from voice trading to electronic trading at lightening speed--and across all asset classes. From listed and OTC derivatives to cash equities to FX, commodities and fixed income, the faster these firms automate their pricing and execution processes, the greater amount of flow they can handle while reducing their per-trade transactions costs."
It is "very important now in the interdealer broker business to have trading technology," said Gooch, adding that it is what distinguishes high-growth firms from low-growth ones. "The most important innovation of the last several years has been electronic trading of OTC derivatives--in energy, credit, equities and financial products. GFI has developed trading technology but, frankly, the opportunity to own the Trayport technology was tremendous."
In a conference call announcing its third-quarter earnings report in November, Gooch signaled GFI's eagerness to pursue near-term mergers. "I think that we are in a good position to look to expand our business beyond organic growth," he said at the time. "One or two of the assets in the marketplace that we could be looking at are in my opinion priced a little richly. But if the economics make sense ... we have an appetite to do something in the near future."
Trayport's GlobalVision platform, which is used by Leipzig, Germany's European Energy Exchange, was also tapped by BlueNext, a joint venture carbon trading market launched last month by NYSE Euronext and French bank Caisse des Depots et Consignations. BlueNext is based on the spot emissions business of Powernext Carbon, which NYSE is acquiring from Powernext, also a Trayport client.
