The international US-based Forex broker, GAIN Capital Holdings, Inc. (NYSE: GCAP), which operates the lucrative FOREX.com website and retail offering has just announced that they will be acquired by INTL FCStone Inc. (NASDAQ: INTL) for $6 per share in an all cash deal. The announcement comes after GAIN Capital reported disappointing quarterly revenue results for the past several periods, having also sold off its ECN business, GAIN GTX previously in 2019.
In its press-release, GAIN Capital indicated that the transaction “represents a 70 percent premium to the closing share price of the Company’s shares on February 26, 2020 and a 60 percent premium to the volume-weighted average price of the Company’s stock in the 30 trading days ending on February 26, 2020.” This premium may be indicative of possible synergies in business between the two firms, which currently focus on different customer bases within the FX industry. Furthermore, the FOREX.com brand is surely to continue to be valuable due to its familiarity among traders around the world.
The company’s announcement also stated that “the transaction is the result of a comprehensive strategic alternatives review process taken by the Company’s Board of Directors” hinting at the fact that GAIN’s Board of Directors and key shareholders have been interested in a investment or sale of shares of the company for some time, as revenue and other performance metrics have been lagging for a significant period of time.
While the deal has just been announced, it is expected that it will take at least until mid-2020 to complete, with important regulatory approvals forthcoming. Considering INTL FCStone’s current FX offerings and business, we believe that significant improvements can be made to GAIN Capital’s retail model, which can generate healthy returns in the future. For GAIN Capital this opportunity may also provide new access to ECN business, which the company exited just last year.