A Knight Deal Draws Closer
Matt is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Wall Street Journal is reporting that Virtu Financial may have an early edge in the race to buy the battered Knight Capital (NYSE: KCG).
Interestingly, the WSJ's article implies that the deal -- with either Virtu or Getco -- would likely be for the whole company. That contrasts earlier reports (also from WSJ) that the deal would be for just Knight's market-making business. That is probably a better deal for investors since it would take the company off their hands entirely rather than simply stripping it of its crown jewel and leaving investors to wonder if they should hang on to the crappier assets left behind.
Virtu is apparently the "leader" in the process because it's likely to make a cash offer as opposed to Getco likely trying to wrangle a cash-and-stock deal and making a run at a reverse merger.
The article suggested that the price being considered is in the range of $1 billion. Now before you look at Knight's market cap on Yahoo!Finance and figure that the deal will be a near double, remember that there are still a lot of preferred shares still out there that haven't been converted yet. Doing a quick run of the numbers, I think a flat $1 billion would put the per-share price around $2.88.
Here's what I can say for sure at this point: The group that bailed out Knight (Jefferies (NYSE: JEF), Blackstone (NYSE: BX), TD Amertrade (NYSE: AMTD), et al.) will do quite well if a deal goes through.
TMFKopp owns shares of The Blackstone Group L.P. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Jefferies Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!
