GETCO Sweetens Offer for Knight Capital
December 18, 2012
GETCO LLC sweetened its offer to acquire Knight Capital Group Inc. as the market maker’s board prepares to decide between competing bids, according to a person with knowledge of the matter.
The Chicago-based high-frequency trader raised the cash element of its proposal to $3.60 a share for 60 percent of Knight, up from $3.50 for 50 percent, said the person, who asked not to be named because the talks are private. Virtu Financial LLC, the other suitor, is offering to pay $3.20 a share to take Knight private, the Wall Street Journal reported, citing unidentified sources. Directors of Knight will probably decide within days which suitor to back, another person said yesterday.
GETCO and Virtu, rivals seeking to acquire the market maker four months after it lost more than $450 million in a computer malfunction, are the only bidders for Jersey City, New Jersey- based Knight, one of the people said yesterday. The offers represent divergent structures for the company led by Chief Executive Officer Thomas Joyce, forcing Knight to choose between immediate cash from Virtu and a value that depends in part on the stock market’s view of GETCO.
CNBC reported GETCO had boosted its cash offer to $3.60 a share earlier. Knight’s shares climbed 2.8 percent to $3.35 as of 2:13 p.m. in New York. They’ve rallied 35 percent since the bids were first reported Nov. 23.
GETCO’s cash and stock offer would keep Knight public. Knight was bailed out by six financial companies in August, its capital depleted after malfunctioning computers bombarded exchanges with orders.
Automated Trading
Kara Fitzsimmons, a spokeswoman at Knight, GETCO’s Sophie Sohn and Alan Sobba, a spokesman for Virtu, declined to comment.
Goldman Sachs Group Inc. is assisting with Virtu’s financial, according to a person with knowledge of the matter. Credit Suisse Group AG, which had previously been in talks to lead Virtu’s financing, is no longer in that role, another person said.
Knight, GETCO and Virtu are automated market makers. While GETCO and Virtu operate across asset classes mainly on exchanges and similar platforms around the world, Knight focuses on U.S. equities. It’s also a wholesale market maker that services hundreds of retail brokers including Fidelity Investments and TD Ameritrade Holding Corp. by executing buy and sell orders for individuals. Neither GETCO nor Virtu is in that business.
GETCO is proposing a two-step reverse merger under which Knight would be reorganized as a holding company. Under the revised proposal, cash would represent about 60 percent of the takeover value, with the rest in shares of the combined firm.
