ITG Jettisons Energy Research Unit to Warburg Pincus for $120 Million

The deal will be subject to a number of regulatory filings and procedures, which are expected to clear and reach

ITG (NYSE:ITG), an independent broker and financial technology provider, has entered into a definitive agreement to sell the Canadian-based unit of its Investment Research to private equity firm, Warburg Pincus, according to an ITG statement.

ITG’s research unit, tapped its Energy Research Group, will be acquired for approximately $120.5 million in cash by Warburg Pincus. The deal will be subject to a number of regulatory filings and procedures, which are expected to clear and reach a finality by Q4 2015, whereupon the unit will launch under a new brand name.

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ITG is anticipating to capture gains of between $90 million and $95 million after taxes from the acquisition, which stands to increase its tangible book value by between $2.85 and $3.00 per share, welcome news for investors searching for any tepid signs of success with the beleaguered company.
Earlier this week, ITG reported its Q3 2015 metrics, which yielded GAAP net income of $2.7 million, or a -76.3% drop YoY from $11.4 million in Q3 2014. The group also experienced a similar decline across its net income per diluted share, which showed just $0.08 in Q3 2015, compared with $0.32 in Q3 2014.

The quarter and outlook was mired after July’s brush with US regulators – ITG as well as its affiliate AlterNet Securities agreed to collectively pay $20.3 million to settle charges over the breach of dark pool trading confidentiality with the SEC.

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In terms of the unit being sold, ITG’s energy research group boasts a comprehensive team of geological and petroleum engineers as well as financial analysts covering more than 150 companies. Warburg Pincus has made its case known that it intends to invest in the business moving forward, looking to partner with the company in a bid to enhance its product offering and client service.

Moreover, as part of the impending transaction, ITG will continue to provide the energy research to its institutional client base, helping serve as the exclusive sales partner for institutional investors.

According to ITG Chief Financial Officer, Steve Vigliotti, in a recent statement on the acquisition, “We are pleased with the value we have been able to create for shareholders from the growth in energy research since we acquired the business in 2011. We look forward to partnering with Warburg Pincus and the energy research team to continue providing their exceptional research product to our clients.”

“We look forward to partnering with management in this next chapter for the business. We are excited about building on the energy research team’s success with its differentiated product offerings and utilizing our information services experience to accelerate its growth plans, to the benefit of its institutional and oil and gas clients,” added Cary J. Davis, Managing Director, Technology, Media and Telecommunications, Warburg Pincus, in an accompanying statement.

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