Breaking: FXCM Inc to Sell Its FXCM Japan Unit to Rakuten Securities
According to a company announcement, FXCM Inc. (NYSE:FXCM) has agreed to sell FXCM Japan Securities Co., Ltd to the Japanese brokerage Rakuten Securities, Inc for $62 million. The figure includes $22 million in cash held on the balance sheet of FXCM Japan.
The definitive agreement has been signed between FXCM Holdings, LLC and the newly formed subsidiary, after the Swiss National Bank’s fiasco, FXCM Newco, LLC companies on the side of FXCM Inc (NYSE:FXCM) and Rakuten Securities Inc, which is a wholly owned subsidiary of Rakuten Inc.
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The new owner of the company, Rakuten Securities, will continue to use the FXCM trading system for legacy FXCM Japan clients. Once the deal is finalized, the new owner will notify the customers about the deal. Following the announcement, shares of FXCM Inc (NYSE:FXCM) were changing hands 8% higher in pre-market trading.
The transaction estimates made by Forex Magnates after the review of the latest earnings call of FXCM, undershot the prospective value of the Japanese subsidiary by about $12 million. The deal is a step in the right direction for FXCM Inc (NYSE:FXCM) with the company’s outstanding loan obligation to Leucadia.
This is the evaluation FXCM gave of the unit in their earnings presentation earlier this month – $22 million in net cash on balance sheet with $6.0 million in Adjusted EBITDA on a Non-GAAP basis in 2014. So at $62 million, after removing the $22 in net cash, they are paying 6.7X EBITDA.
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Pinnacle Inc. served as a financial advisor on the deal.
Back in 2011, FXCM Inc (NYSE:FXCM) paid $5 million for GCI, which had 17,000 accounts and $110 million in equity. Later that year, the brokerage took over Foreland paying $17 million for the aquisition.
According to the announcement, the deal is expected to close on April 1, 2015, subject to customary closing conditions and the final purchase price will be based on FXCM Japan’s March 31, 2015 balance sheet.
The company’s CEO Drew Niv said in the announcement, “We are pleased to announce this transaction with Rakuten Sec, as they are an innovative and strong firm. We are confident that they will provide the same level of excellent service and trading environment that our account holders have experienced at FXCM.”
The President of Rakuten Securities, Yuji Kusunoki said, “We are delighted to invite FXCM Japan to Rakuten group. We believe that our combined capability will enhance our strategy to be the top FX service provider in Japan.”
Thanks for the write up! We really appreciate it.
$62m?? How much cash does FXCM Japan have? I can’t imagine anyone would pay that much for just customers..
That’s mean FXCM Japan make alot of profit and they know they will make alot more profit,just wonder how much FXCM have make profit for the pass 20 years.
They sold FXCM Japan alone for $62 million. That mrans FXCM US alone is worth for sure more than $100 million. Current Mkt Cap is $109.261 million. Their share is undervalued. Time to buy
The elephant in the room is how will FXCM bring in revenue, even if they do manage to pay back the loan?
Japan unit does much more volume than US, like 3x-4x as much according to this chart breakdown:
http://forexmagnates.com/fxcm-inc-conference-call-review-huge-business-shakeup-coming/#sthash.Ld3ZezrB.dpuf
It would be impressive if FXCM can pay back the loan. The question would be how would they ever turn a profit? They are downplaying their loss of Japan and possibly HK units (Singapore also?) as no big deal. It’s a HUGE deal.
Smart move. Think about it. Ehat if Japanese regulator is investigating FXCM Japan on wrongdoing of Swiss franc incident, and dozens of civil litigation awaits. By exiting Japan business, FXCM effectively save alot on legal expense and avoid its image from being tarnished should regulator issue sanctions