Knight Capital Group capped its biggest rally in nine years after getting takeover offers from Getco LLC and Virtu Financial LLC, setting up a bidding war that may end its 17-year history as an independent company.
Bloomberg reports that Getco’s cash and stock offer values Knight at $3.50 a share, an 18 percent premium from the November 27th close, and retains its public listing, according to a filing yesterday from the Chicago-based high-frequency trader. Virtu submitted a bid to buy Knight for about $3 a share, a person with direct knowledge of the matter said. Another person familiar said the company’s offer was made yesterday. Knight was bailed out by six financial companies in August after losing more than $450m in a trading malfunction.
The offers represent divergent structures for the surviving company and will force Knight’s board to choose between immediate cash and a value ascribed in part by the stock market’s view of Getco. Shares of the Jersey City, New Jersey-based market maker rose 15% percent to $3.42 yesterday, bringing its three-day rally to 37%, the most since July 2003.
'If you’re involved in a share deal, then you’re betting that their market is going to continue to grow and there is an upside after the deal, whereas in a cash-only deal the upside is you’re taking cash, and cash now', said Sang Lee, managing partner at Boston-based Aite Group LLC, in a phone interview. 'It really depends on how the shareholders look at the market that all these firms are in'.
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