US forex giant Forex Capital Markets (FXCM) said on Friday it has signed an agreement to sell to UK peer IG Group its news and research service DailyFX for $40 million. The deal is expected to be closed by the end of October as it is subject to closing conditions and final approval by the buyer. In a separate statement, IG Group said it has “struck a $40.0 million deal to acquire” DailyFX, letting us believe that the deal will take place.
FXCM will use the money to repay part of the loan it owns to lender Leucadia National Corp. and will have repaid more than half its debt. Following the transaction, it will have made loan repayments of $157 million to Leucadia with $153 million outstanding. In early 2015, FXCM drew a $300 million loan from the lender to meet the minimum capital requirements after experiencing a tough moment.
“While DailyFX is a high quality asset and was not a targeted asset to sell, the opportunity came along and it was something we felt we should take advantage of,” said FXCM CEO Drew Niv. “At this time, we do not plan on selling any other retail FX assets and believe the remaining assets held for sale satisfy the remaining debt outstanding to Leucadia,” he added.
Meanwhile, IG Group said in a separate notice also published on Wednesday that the deal is part of its target to become the “default choice” for active investors globally and that the acquisition will deliver enough extra new clients that it will be earnings enhancing by the company’s 2018 financial year.
Once the transaction is completed, a transition period for migration purposes will begin immediately. Cash of $36 million will be paid to FXCM on closing, with the additional $4 million to be paid on completion of certain migration requirements. Upon completion, IG Group will receive the entire DailyFX business including all international and domestic web domains, source code and content, in addition to all 34 employees currently working on DailyFX domains.
“We are extremely pleased to have had the opportunity to purchase what we consider to be the leading global client recruitment resource in the FX environment, an asset type where IG is very strong, but historically underweight,” said IG Chief Executive Peter Hetherington.
FXCM said that it will continue to offer forex trading education and news and analytics through its web domains as well as on the FXCM Trading Station platform and charting package. FXCM clients will also still have access to IG’s DailyFX PLUS. Moreover, the broker will soon launch FXCM Plus, a password protected webpage for all FXCM live clients which will include the broker’s proprietary data such as signals, sentiment data (SSI), live webinars and technical alerts.
Following the Swiss franc-related crisis from January 2015, FXCM’s clients experienced heavy losses and generated negative equity balances of combined some $225 million. This put the broker in breach of the regulatory capital requirements. To resume operations normally FXCM was forced to draw a $300 million cash credit from US-based lender Leucadia National Corp. It also sold its subsidiaries FXCM Japan Securities and FXCM Asia, aka FXCM Hong Kong, to its Japanese peer Rakuten Securities. In March 2016, the broker and the lender agreed on a one-year extension of the credit agreement to January 2018.
Last month, the US Commodity Futures Trading Commission (CFTC) issues a statement, saying that it has filed a civil enforcement action with a local court, charging FXCM with undercapitalization, failure to timely report its undercapitalization violation, and guaranteeing against customer losses at the time of the crisis in January 2015.
The FXCM Group is 50.1% majority owned by FXCM Inc. The rest of the group moved to the hands of Leucadia National Corporation earlier this month as part of a a definitive agreement the two companies signed to amend the conditions of their credit letter agreements. Since Monday this week, FXCM Inc. Movied to the NASDAQ Global Market from the New York Stock Exchange.
IG Group’s lead regulator is the UK’s Financial Conduct Authority (FCA), but its subsidiaries are also regulated by the relevant authorities in the countries where they operate.