This day in history: FXCM sets eyes on GAIN Capital, makes acquisition bid

Maria Nikolova

Four years ago, FXCM proposed a transaction that would have given Gain shareholders 0.3996 shares of FXCM Class A common stock for each share of Gain common stock.

The tables turn frequently in the Forex industry. FinanceFeeds has kept its readers up-to-date with the latest developments around FXCM, following settlements with regulators that forced the broker out of the US retail FX market. One of these developments was the sale of FXCM US retail accounts to GAIN Capital.

Four years ago, however, the situation was quite different. It was FXCM that was eyeing GAIN Capital.

A letter from FXCM Inc (now known as Global Brokerage Inc) dated April 8, 2013, contained a proposal for the acquisition of GAIN Capital. Under the proposal, Gain shareholders would have received 0.3996 shares of FXCM Class A common stock for each share of Gain common stock. Based on FXCM’s closing price of $13.39 on April 8, 2013, the offer price was $5.35 per share of Gain common stock. The total was $210.4 million. The offer price represented a 25% premium to Gain’s closing share price on April 8, 2013.

FXCM said back then it was also prepared to offer up to $50 million in cash consideration in lieu of FXCM shares.

The Board of GAIN Capital replied that it will consider the proposal, as well as “a range of options to build shareholder value”. It reiterated there was no assurance that any transaction would be consummated.

This was an important remark to make, as on April 9, 2013, GAIN’s Board of Directors announced the adoption of a stockholder rights plan, aimed at reducing the likelihood that a potential acquirer would obtain control of GAIN by open market accumulation or other tactics without paying an appropriate premium for the company’s shares.

Under the plan, Rights would be distributed as a dividend at the rate of one Right for each share of common stock of the company held by stockholders of record at the close of business on April 22, 2013. Each Right would entitle stockholders to buy, upon occurrence of certain events, one one-hundredth of a share of a new series of participating preferred stock at an exercise price of $17.00.

The Rights would have generally been exercisable only if a person or group had acquired beneficial ownership of 15% or more of the company’s common stock, or had commenced a tender or exchange offer that, upon consummation, would have resulted in a person or group owning 15% or more of the company’s common stock, subject to certain exceptions.

The official “No” answer to FXCM’s proposal was given on April 25, 2013, when GAIN Capital announced the acquisition of GFT to bolster its derivatives and FX business. The reason for the rejection was that the bid was seen as undervaluing GAIN and would not have been in the best interest of the shareholders. FXCM Inc withdrew the offer after that.

Four years later…

FXCM Inc is now Global Brokerage Inc and FXCM is out of the US retail FX market. On February 7, 2017, GAIN entered into a definitive agreement to acquire the US retail client accounts of FXCM. There was no upfront payment made, with the sum to be paid depending on the trading activity of the clients migrated. The transition was formally completed during the weekend following February 24, 2017. According to GAIN, the move saw the transfer of more than 47,000 accounts with total assets of about $142 million from FXCM US.

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