TP ICAP confirms advanced discussions for proposed acquisition of Liquidnet

Maria Nikolova

The total consideration for the deal is between US$600m and US$700m comprising approximately US$550m upfront.

TP ICAP PLC (LON:TCAP) today announces that it is in advanced discussions relating to the proposed acquisition of the entire issued share capital of technology-driven, global electronic trading network Liquidnet Holdings, Inc. The total consideration is between US$600 million and US$700 million comprising approximately US$550 million upfront, deferred non-contingent consideration of US$50 millioon and an earn-out of up to US$100 million.

The Board of TP ICAP notes that Liquidnet has been a trusted partner to buyside clients for two decades, building up comprehensive workflow connectivity to a network of more than 1,000 buyside institutions1. Liquidnet has already proven its ability to leverage its network and relationships to enter new market segments.

There are also addressable growth opportunities, arising from the combined strengths of Liquidnet and TP ICAP.

For instance, D2C electronic Credit trading has been growing rapidly. Liquidnet has already built an impressive global network of more than 500 buyside institutions, with execution protocols focussed mainly on large-size client-to-client trading of corporate bonds. TP ICAP expects to use its Credit market expertise, its established relationships with the global dealer community, and Liquidnet’s existing capabilities, to expand the Liquidnet offering to include a range of D2C tools and protocols. In a growing market segment, TP ICAP expects the Enlarged Group to present a highly attractive offering to market participants.

In addition, in the Rates market, over-the-counter trading represents an increasing share of interest rate derivative trading, and the rate of electronification in the D2C segment is growing particularly rapidly. TP ICAP believes it can create a powerful competitor in the growing D2C electronic trading arena.

Also, Liquidnet’s Investment Analytics team and artificial intelligence and machine-learning tools are expected to complement and enhance TP ICAP’s product development and service capabilities. TP ICAP’s global sales team expects to present useful tools and products (such as the recently launched Bond Evaluated Pricing service) to the Liquidnet client base, accelerating penetration of the buyside market for data and analytics.

The Potential Acquisition would be expected to transform TP ICAP’s revenue growth profile, with almost half of the Enlarged Group’s revenue coming from higher-growth businesses and the Enlarged Group’s revenue growth profile expected to increase from low single digit to mid-single digit over the medium-term. Liquidnet would also be expected to contribute to a c.300bps improvement in underlying operating margin, leading the Enlarged Group to a 20%+ operating margin over the medium-term.

In order to achieve this margin improvement, TP ICAP expects a c.£25-30m incremental investment spend on Liquidnet in the 12-24 months post completion of the Potential Acquisition (“Completion”). Further, based on TP ICAP’s closing share price on the day prior to this announcement3, the Potential Acquisition is expected to be broadly earnings neutral in Year 2, and meaningfully accretive in Year 3.

TP ICAP plans to fund the potential acquisition via US$100 million in cash to be paid on completion, to be funded using TP ICAP’s existing debt facilities, plus approximately US$450 million in cash, to be funded by way of:

  • a. An initial 19.9% cashbox placing on announcement of the entry into the Potential Acquisition, to be paid to Liquidnet stockholders on Completion; and
  • b. A further non-pre-emptive placing closer to or shortly after Completion, but with the amount payable as consideration to be adjusted for the performance of TP ICAP’s shares between announcement and Completion, to be paid shortly after Completion;

There will also be US$50 million of senior unsecured loan notes issued on Completion to certain stockholders in Liquidnet, repayable in cash on the third anniversary of Completion, as well as an earn-out of up to a maximum of US$100m in cash, linked to the cumulative revenues generated solely by Liquidnet’s Equities business in the three years ending 31 December 2023.

The Potential Acquisition would be conditional upon, inter alia, the approval of TP ICAP shareholders, completion of the previously announced Redomiciliation and regulatory clearances, as well as other customary conditions.

Let’s recall that, in December 2019, TP ICAP announced its intention to reorganise the Group’s international corporate structure by the introduction of a new holding company in Jersey by means of a Court-approved scheme of arrangement. The Redomiciliation is expected to complete in he first quarter of 2021.

Read this next

Retail FX

Banxso announces 8.7% interest rate on deposits in South Africa

“With Banxso, they can enjoy the benefits of both worlds – earning competitive interest and having the freedom to trade, all within the same platform.”

Industry News

FINRA to publish transaction details in U.S. Treasury securities

“Consistent with our longstanding practice, FINRA is introducing greater transparency in a calibrated and careful manner, benefiting liquidity and resilience in this critical market while also mitigating potential information leakage concerns.”

Institutional FX

OpenYield launches “cheap and easy” fixed income trading for brokers

“We’re on a mission to make bonds cheap and easy to trade, and are excited about the opportunity to build generational capital markets infrastructure.”

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

<