Breaking: BATS Global Markets Acquires KCG Hotspot for $365 Million in Cash

The deal includes sharing of certain tax benefits between the companies which could save KCG Holdings up to $70 million

bats_logo_squareAccording to a company announcement by KCG Holdings, the company has sold its KCG Hotspot unit to BATS Global Markets for $365 million. The move, which will allow BATS to foray into electronic foreign exchange trading, is part of the company’s strategy to diversify its business.

The parties have also agreed on sharing a set of tax benefits, resulting in an approximate deal-value increase of $70 million over three years for KCG. The tangible book of KCG Holdings is expected to increase by about $2.00 a share.

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Back in the beginning of January and right after the Swiss franc debacle, Forex Magnates reported about the market rumors that KCG Holdings is in talks with BATS for the sale of its foreign exchange platform.

According to BATS Global Markets, closing of the deal is expected in the first half of 2015. The move represents a continuing diversification of the company’s portfolio away from its traditional equity trading business.

The average daily volumes at KCG Hotspot have totaled to above $30 billion throughout the second half of 2014, while the month of January is on track to becoming the company’s best ever.

KCG Holdings’ CEO Daniel Coleman shared in the company’s announcement, “The sale of Hotspot is expected to realize significant value for KCG’s shareholders while simultaneously allowing us to continue to focus on the expansion of our global FX client market making business.”

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“Upon completion of the deal, our focus will be on putting the cash to good use for KCG and our shareholders,” he concluded.

The CEO of BATS Global Markets, Joe Ratterman, said, “Hotspot is an innovative foreign exchange leader which will become an important part of our expanding global footprint, and we are excited to welcome their highly-regarded team to BATS Global Markets.”

“Their FX expertise and reputation, along with our technology excellence and global presence, will make for a powerful combination and enable us to have a meaningful and significant impact on the direction of the FX market in the years to come,” he explained in the announcement.

Mr. Coleman continued, “After conducting a thorough and competitive process, it became clear that BATS is the right strategic partner for Hotspot, as well as its clients and employees. BATS and Hotspot share a commitment to technological excellence.

“This, coupled with the experience, resources and insights derived from operating global multi-asset class markets, ensures that BATS is well positioned to further accelerate Hotspot’s growth,” he concluded.

KCG was advised on the transaction by Jefferies LLC and Sullivan & Cromwell LLP. “We are pleased to announce that we have entered into a definitive agreement to sell Hotspot to BATS Global Markets,” added a KCG spokesperson in a statement to Forex Magnates.

KCG recently reported its consolidated earnings for Q4 2014, coming in at $26.1 million, or $0.23 per diluted share. Furthermore, these results in Q4 2014 include a net tax benefit of  $7.0 million. At this time, there are no additional details on the aforementioned sale.

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