Interdealer broker Icap has signed a letter of intent to acquire the majority of BrokerTec Global's trading operations in a deal valued at up to $240 million.
Under the agreement, Icap will make an initial payment of $153.8 million with a deferred consideration of up to $86.5 million. This is dependent on revenues earned on the BrokerTec platform over the next 12 months.
Icap will issue 11,989,509 new shares to fund the initial consideration and up to an additional 6,744,099 new Icap shares for the final amount. Shares for the initial payment are to be held for a prescribed period. Additional incentives will be in place for the BrokerTec shareholders to hold the acquired Icap shares for periods of up to seven years. Certain BrokerTec shareholders will enter into commitments guaranteeing revenue for a minimum three-year period.
BrokerTec operates an electronic dealing platform for fixed income securities, transacting more than $38 trillion since it began operations two years ago.
The acquisition will not include nor affect BrokerTec's futures business, which will continue to remain independent and will enter into a long-term services agreement to continue to use the BrokerTec platform.
Michael Spencer, group chief executive of Icap, says: "BrokerTec has successfully developed a powerful electronic trading platform with very low operating costs. Icap and BrokerTec is a strong combination to satisfy industry demand for premier hybrid broking services."
James Forese, chairman of BrokerTec and a managing director of Salomon Smith Barney, adds: "Together, Icap and BrokerTec will provide a unique mix of brokerage services. We expect the competitive environment in the fixed income brokerage industry to become even healthier as a result."