TIDMTCAP
RNS Number : 6191B
TP ICAP PLC
09 October 2020
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR WITHIN THE UNITED
STATES, CANADA, SOUTH AFRICA, JAPAN OR AUSTRALIA.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
9 October 2020
TP ICAP PLC
PROPOSED ACQUISITION OF LIQUIDNET
-- Accelerates delivery of the three pillars of TP ICAP's
strategy - electronification, aggregation and diversification
-- Transformational opportunity for TP ICAP to diversify its
business mix, accelerate upward shift of revenue growth profile and
improve underlying operating margin
-- Leverages Liquidnet's trading platform and network of over
1,000 buyside clients (1) and TP ICAP's product market expertise
and dealer relationships/connectivity to create a new global
challenger in electronic Credit and Rates Fixed Income trading
-- TP ICAP intends to continue to invest in Liquidnet's leading
buyside-focused dark/block cash Equities platform, and to preserve
its trusted neutral position as an unconflicted agency broker
-- Rights issue to raise proceeds of approximately US$425
million fully underwritten on a standby basis
Following the announcement made on 29 September 2020, TP ICAP
plc ("TP ICAP" or the "Company" and together with its subsidiaries,
the "Group") confirms that it has agreed definitive terms to
acquire the entire issued share capital of Liquidnet Holdings, Inc.
("Liquidnet" and, together with its subsidiaries and the Group, the
"Enlarged Group") for a total consideration of between US$575
million and US$700 million, comprising cash consideration of US$525
million (subject to customary adjustments) payable on completion of
the Acquisition ("Completion"), non-contingent deferred
consideration of US$50 million and contingent consideration of up
to US$125 million (the "Acquisition"). The Acquisition is expected
to complete in Q1 2021.
The Acquisition creates a UK-headquartered, global financial
markets infrastructure provider. The Enlarged Group will be
well-positioned to benefit from powerful market structure trends
related to buyside objectives, such as achieving trade process
efficiency and best execution, which are propelling the rapid
electronification of financial market trading across multiple asset
classes and, in particular, in the dealer-to-client ("D2C")
segments of the Credit and Rates markets.
Commenting on the Acquisition, Nicolas Breteau, CEO, TP ICAP,
said:
"Acquiring Liquidnet is a unique opportunity to transform TP
ICAP's growth prospects by materially accelerating the execution of
our electronification, aggregation and diversification
strategy.
Liquidnet is a premier, technology-driven, global electronic
trading network with more than 1,000 buyside clients(1) . It has a
strong and trusted brand, which we will both retain and develop. We
will continue to invest in, and grow, Liquidnet's leading
dark/block Equities business, and maintain its position as a
trusted and unconflicted agency broker.
Liquidnet's electronic network incorporates extensive buyside
trade workflow connectivity, including integrations with all major
order management and execution management systems. We intend to
build on Liquidnet's capabilities and connectivity, and expand its
offering, particularly in respect of D2C electronic trading in
Credit and Rates. Further, we expect to leverage the data assets
and analytics expertise of both organisations to drive
non-transaction-related earnings.
We believe that TP ICAP's strong dealer relationships and
product expertise are highly complementary to Liquidnet's
electronic capabilities and global buyside customer base. In
addition, its global low-touch block cash Equities franchise
complements our existing high-touch derivatives and cash Equities
activities. Combined, TP ICAP and Liquidnet will be able to offer
our clients compelling electronic trading and analytics solutions,
driving sustained growth and shareholder value creation over the
medium and long-term."
Commenting on the Acquisition, Brian Conroy, CEO, Liquidnet,
said:
"We are energised by the opportunity of combining the strengths
of TP ICAP and Liquidnet. This transaction underscores the
relevance and future prospects of a business we started two decades
ago, and which has grown to become not only a leader in global
institutional equities block trading, but also one of the world's
premier buyside-focused electronic networks.
Together, we will be able to better serve our customers, whilst
simultaneously delivering innovative market solutions to a broader
range of institutions, across a wider range of asset classes and
market segments. TP ICAP's customer base, unique data assets and
global leadership across a range of product markets are highly
complementary to Liquidnet and are expected to enable the
acceleration of our growth plans across Equities, Fixed Income and
Investment Analytics."
Strategic highlights
The Acquisition accelerates delivery of the three pillars of TP
ICAP's strategy - electronification, aggregation and
diversification, and is expected to transform TP ICAP's earnings
profile and growth trajectory. The Enlarged Group's earnings mix
will progressively reflect the contribution from higher growth and
higher margin businesses, including electronic D2C Credit and Rates
trading and Data & Analytics.
Importantly, the Acquisition:
-- Provides TP ICAP with substantial electronic trading and
workflow connectivity to the buyside. Liquidnet's global integrated
buyside network ranks amongst the largest electronic trading
communities in the world, comprising over 1,000 institutional asset
management clients(1) , and it integrates with all major
order/execution management systems. In addition to delivering
substantial customer base diversification, the Liquidnet platform
represents a rare foundation upon which to build.
-- Diversifies TP ICAP's asset class exposure. Liquidnet's
low-touch buyside-focused cash Equities model delivers expertise
across block (or dark) and lit markets and is complementary to TP
ICAP's existing high touch inter-dealer oriented Equities activity,
and the Enlarged Group intends to continue to invest in
strengthening and growing the Liquidnet business.
-- Offers a number of immediately addressable, and sizeable, opportunities, including:
o Expansion of Liquidnet's electronic Credit trading offering to
the D2C segment of the market, where sizeable competitor platforms
serving a rapidly growing marketplace are currently few in number;
and
o The introduction of a D2C electronic trading offering for the
Rates market - the largest asset class by volume in the world -
which is currently predominantly served by a limited number of
large platforms offering D2C trading protocols.
-- Accelerates the growth and development of both Liquidnet and
TP ICAP's data and analytics offerings by leveraging the Enlarged
Group's rich data sets, product and analytical expertise, customer
relationships and distribution capabilities.
About Liquidnet
-- Liquidnet is a leading global electronic trading network.
-- Liquidnet is a trusted global specialist in cash Equities
dark/block trading, with a growing Fixed Income presence, and an
advanced data science capability within its Investment Analytics
division.
-- Liquidnet provides its more than 1,000 buyside clients(1) ,
who collectively manage US$33 trillion in equity and fixed income
assets(2) , with to access 45 markets worldwide.
-- Built over a 20 year period, Liquidnet's network is well
embedded into institutional workflows, including their signature
institutional desktop trading applications and via integrations
with major order/execution management systems.
Financial highlights
The Enlarged Group will have the following medium-term
ambitions:
-- Mid-single digit cross-cycle revenue growth;
-- Targeting Liquidnet to contribute c.300bps improvement in
underlying operating margin and for the Enlarged Group to achieve a
20%+ underlying EBIT margin over the medium-term; and
-- c.GBP25 - GBP30 million incremental investment spend by the
Enlarged Group on Liquidnet in the 12-24 months post-Completion,
which will be focused mainly on technology work related to the D2C
Rates opportunity, described above.
Based on TP ICAP's share price as at close of business on 8
October 2020, the Acquisition is expected to be accretive to
underlying EPS in Year 3. The expected financial impact of the
Acquisition on underlying EPS will be updated based on the
prevailing share price at the time of the Rights Issue.
Dividend
The Acquisition represents a transformational step in TP ICAP's
journey towards becoming a leading global provider of market
infrastructure, capable of delivering strong growth over time. In
approving the Acquisition, the board of directors of TP ICAP (the
"Board") has taken into account the medium-term sustainable cash
flow generation and capital priorities of the Enlarged Group,
including the importance of the dividend to TP ICAP
shareholders.
As previously announced, if the Acquisition is approved by TP
ICAP shareholders, the Board intends to recommend a one-off 50%
reduction of the minimum GBP94 million dividend in respect of the
financial year ending 31 December 2020. This will help fund the
Acquisition and minimise dilution of earnings on a per share basis
of the Enlarged Group as a result of the Rights Issue.
For the financial year ending 31 December 2021 onwards, the
Board intends to introduce a new dividend policy that will target a
dividend cover of approximately 2x underlying earnings. The new
dividend policy reflects a balanced approach to capital allocation
allowing the Group to invest to drive growth, while allowing
dividends to increase with the progress of underlying earnings.
Financing the Acquisition
The non-contingent base consideration of US$575 million is
expected to be financed as follows:
(i) the issue by the Company of new equity by way of a rights
issue to raise proceeds of approximately US$425 million (the
"Rights Issue"), which has been fully underwritten on a standby
basis by HSBC Bank plc ("HSBC");
(ii) US$100 million by drawing down from TP ICAP's existing debt facilities; and
(iii) US$50 million to be paid on the third anniversary
following Completion, represented by unsecured loan notes issued to
certain stockholders in Liquidnet at Completion (the "Loan
Notes").
Strong shareholder support and Board's recommendation
Additionally, having consulted several of our largest
shareholders, owners of approximately 29% of the issued share
capital are supportive of the Acquisition, and have indicated their
current intention to vote in favour of the Resolution at the
General Meeting.
The Board has approved the Acquisition and intends to recommend
unanimously that TP ICAP shareholders vote in favour of the
resolution to approve the Acquisition (the "Resolution"). The
directors of TP ICAP who own shares have committed to vote in
favour of the Resolution in respect of their own beneficial
holdings and, in addition, the executive directors of TP ICAP (the
"Executive Directors") have agreed to take up their respective
entitlements under the Rights Issue.
Update on Redomiciliation
Separately, on 23 December 2019, TP ICAP announced its intention
to reorganise the Group's international corporate structure (the
"Redomiciliation") by the establishment of a new holding company in
Jersey ("New TP ICAP") by means of a Court-approved scheme of
arrangement (the "Scheme"). A separate circular to be issued by the
Company (the "Scheme Circular") summarising the Redomiciliation and
a prospectus to be issued by New TP ICAP (the "New TP ICAP
Prospectus") is expected to be published in January 2021. The
Redomiciliation is expected to complete in early 2021.
Webcast details
TP ICAP will host a presentation for investors and analysts
today at 9.30 a.m. (UK time):
Webcast link:
https://streamstudio.world-television.com/854-1116-25487/en
Joining by telephone:
-- United Kingdom (Local) 020 3936 2999
-- United Kingdom (Toll Free) 0800 640 6441
-- United States (Local) 1 646 664 1960
-- All other locations +44 20 3936 2999
Participant access code:
-- 621187 - Participants will be greeted by an operator who will register their details.
Transaction website
Website link: http://www.tpicaptransaction.com/
Enquiries
For further information, please contact:
TP ICAP
Al Alevizakos (Head of Investor
Relations) +44 (0) 799 991 2672
Richard Newman (Head of Marketing
&
Communications) +44 (0) 746 903 9307
William Baldwin-Charles (Director
of Media
Relations) +44 (0) 783 452 4833
BofA Securities (Lead Financial Adviser to TP ICAP)
Fraser Allan/Geoff Iles +44 (0) 20 7628 1000
HSBC (Sole Sponsor, Joint Financial Adviser, Sole Global
Coordinator and Joint Corporate Broker to TP ICAP)
Simon Alexander/Andrew Owens +44 (0) 20 7991 8888
Peel Hunt (Joint Corporate Broker to TP ICAP)
Andrew Buchanan/Jock Maxwell Macdonald +44 (0) 20 7418 8900
Maitland/AMO (Financial PR)
Neil Bennett/Andy Donald +44 (0) 207 379 5151
The person responsible for arranging and authorising the release
of this announcement is Richard Cordeschi, Group Company Secretary
of TP ICAP plc.
Proposed acquisition of Liquidnet
Introduction
Following the announcement made on 29 September 2020 that TP
ICAP was in advanced discussions to acquire the entire issued share
capital of Liquidnet, the Company confirms that it has agreed
definitive terms to acquire Liquidnet for a total consideration of
between US$575 million and US$700 million. This comprises
non-contingent cash consideration of US$525 million payable on
Completion and US$50 million deferred consideration. TP ICAP will
pay up to a further US$125 million depending on the performance of
the Liquidnet Equities business over the three year period
commencing on 1 January 2021. The consideration implies an
EV/EBITDA multiple of between 9.0x and 10.9x Liquidnet's LTM Jun-20
Adjusted EBITDA(3) of US$64 million.
Liquidnet is a leading global electronic trading network that
connects buyside clients to liquidity in the equity and fixed
income markets through its electronic trading platform. The
Acquisition creates a UK-headquartered, global financial markets
infrastructure provider. The Enlarged Group will be well positioned
to benefit from powerful market structure trends related to buyside
objectives such as achieving trading efficiency and best execution,
which are propelling the rapid electronification of financial
market trading across asset classes, and in particular in the
Credit and Rates segments.
The Board has approved the Acquisition and intends to recommend
unanimously that TP ICAP shareholders vote in favour of the
Resolution. The directors of TP ICAP who own shares have committed
to vote in favour of the Resolution in respect of their own
beneficial holdings and, in addition, the Executive Directors have
agreed to take up their respective entitlements under the Rights
Issue.
Additionally, having consulted several of our largest
shareholders, owners of approximately 29% of the issued share
capital are supportive of the Acquisition, and have indicated their
current intention to vote in favour of the Resolution at the
General Meeting.
TP ICAP expects to publish a circular (the "Acquisition
Circular"), including a notice of a general meeting (the "General
Meeting"), and a prospectus (the "Rights Issue Prospectus") in
connection with the Acquisition and Rights Issue in January 2021.
Subject to the satisfaction (or, where applicable, waiver) of the
conditions to the Acquisition, including the receipt of relevant
regulatory approvals, the Acquisition is expected to complete in Q1
2021.
Reasons for the Acquisition
TP ICAP Strategy
TP ICAP's goal is to expand its proposition as a leading global
provider of market infrastructure. TP ICAP seeks to take advantage
of market evolution and drive long-term growth and shareholder
value by focusing on its stated strategy on three key pillars:
-- Electronification : TP ICAP intends to enhance its
medium-term profitability potential by better using technology to
improve the efficiency of its client-facing services and internal
operations;
-- Aggregation: TP ICAP aims to enhance its position as a global
player in over-the-counter ("OTC") markets by using technology to
improve market depth - specifically, by giving clients the ability
to access the liquidity pools available across the Group's separate
brands; and
-- Diversification: TP ICAP seeks to continue to leverage its
markets expertise and capability to further diversify its revenues,
specifically in its faster-growing divisions, including Data &
Analytics, Institutional Services and Energy & Commodities.
Strategic Rationale for the Acquisition
Liquidnet represents a transformational opportunity for TP ICAP
to diversify its business mix, accelerate the achievement of its
strategic goals and bring about an upward shift of its revenue
growth profile and an improvement in its underlying operating
margin. The Acquisition will strengthen TP ICAP's market position,
longer-term growth prospects and profitability.
The Board believes the strategic rationale for the Acquisition
is well supported by a number of attributes and opportunities:
1) Global integrated buyside customer base and connectivity:
Liquidnet has been a trusted partner to buyside clients for two
decades, building up comprehensive workflow connectivity to a
network of more than 1,000 buyside institutions(1) . Liquidnet has
already proven its ability to leverage its network and
relationships to enter new market segments. Since 2015, when
Liquidnet launched its Fixed Income offering, it has built a
network of more than 500 active asset management clients(1) . TP
ICAP believes there is clear potential to build further,
complementing Liquidnet's strengths and shared unconflicted
agency-only model with its own product expertise, dealer
relationships, and connectivity;
2) Diversification of asset class exposure: Liquidnet's
low-touch buyside-focused cash Equities model is complementary to
TP ICAP's existing high-touch inter-dealer oriented Equities
activity, and the Enlarged Group will continue to invest in
strengthening and developing Liquidnet's offering, including its
growing Equities algorithms business; and
3) Addressable growth opportunities, arising from the combined
strengths of Liquidnet and TP ICAP:
o D2C Credit trading: The market structure for trading Credit
products has evolved significantly in recent years, in response to
changes in regulation and other market trends. In particular, D2C
electronic Credit trading has been growing rapidly over the past
several years. Liquidnet has already built an impressive global
network of more than 500 buyside institutions(1) , with execution
protocols focused mainly on large-size client-to-client ("C2C")
trading of corporate bonds. TP ICAP expects to use its Credit
market expertise, its established relationships with the global
dealer community, and Liquidnet's existing capabilities, to expand
the Liquidnet Credit platform to include a range of D2C tools and
protocols. In a growing market segment, which is currently served
by only a small number of platforms having a client network
comparable to that of Liquidnet, TP ICAP expects the Enlarged Group
to present a highly attractive offering to market participants;
o D2C Rates trading: Driven by regulation, the share of OTC
products have grown as a proportion of overall interest rate
derivatives trading. In addition, market structure trends related
to best execution and trade process efficiency have propelled a
robust trend of trade electronification within the overall Rates
segment (i.e., including both interest rate derivatives and
government bonds). Electronic volumes are growing particularly
rapidly in the D2C segment of the market, and there are currently
few electronic platform operators with substantial buyside client
networks serving the marketplace. With its existing dealer
connectivity, and its close relationships with major global banks,
TP ICAP believes that it can create a powerful competitor in the
growing D2C electronic trading arena; and
o Data & Analytics product and customer opportunities: TP
ICAP already offers market participants one of the largest and
richest OTC datasets available globally. Liquidnet's Investment
Analytics team and artificial intelligence and machine-learning
tools are expected to complement and enhance TP ICAP's product
development and service capabilities. TP ICAP's global Data &
Analytics sales team expects to present useful tools and products
(such as the recently launched Bond Evaluated Pricing service) to
the Liquidnet client base, accelerating the Enlarged Group's
penetration of the buyside market for data and analytics.
Medium-term financial targets for the Enlarged Group
The Acquisition is expected to transform TP ICAP's earnings
profile and growth trajectory, with the Enlarged Group's earnings
mix progressively reflecting the contribution from higher growth
and higher margin businesses, including electronic D2C Credit and
Rates, Data & Analytics and Institutional Services. The
anticipated shift in earnings drivers is expected to contribute to
enhanced revenue growth and margin expansion potential for the
Enlarged Group.
The Enlarged Group will have the following medium-term
ambitions:
-- Mid-single digit cross-cycle revenue growth;
-- Targeting Liquidnet to contribute c.300bps improvement in
underlying operating margin, and for the Enlarged Group to achieve
a 20%+ underlying EBIT margin, over the medium-term; and
-- c.GBP25 - GBP30 million incremental investment spend on
Liquidnet in the 12-24 months post-Completion, which will be
focused mainly on technology work related to the D2C Rates
opportunity, as described above.
Summary information on Liquidnet
Liquidnet is a premier brand, technology-driven, international
electronic trading network that connects more than 1,000 buyside
clients(1) globally in the Equities and Fixed Income markets.
Liquidnet has acted as a trusted partner to its clients for 20
years and its platform is fully integrated into their end-to-end
workflows. Across both asset classes, Liquidnet clients manage more
than US$33 trillion in assets(2) .
Liquidnet comprises three divisions - Equities, Fixed Income and
Investment Analytics:
-- Equities: Liquidnet's largest and most established business,
servicing more than 1,000 buyside clients(1) across 45 markets, the
Equities division is focused on low-touch buyside-to-buyside block
trading, providing execution solutions, workflows and liquidity
sourcing techniques. Clients represent an average of US$79 billion
of daily liquidity(4) within the Liquidnet network;
-- Fixed Income: Connecting the liquidity of more than 500
buyside clients globally(1) , Liquidnet's Fixed Income division
offers intelligent execution solutions, with a focus on large C2C
trades, with buyside clients representing c.US$13 billion average
daily liquidity(5) in the system; and
-- Investment Analytics: Liquidnet's Investment Analytics
division allows investors to analyse, filter and organise data
through artificial intelligence, machine learning and natural
language processing. This data-driven market intelligence is
designed to help traders capture more alpha by reaching conviction
more quickly.
In the LTM(6) , Liquidnet had US$64 million (c.GBP49 million(7)
) of adjusted EBITDA(8) on US$339 million (c.GBP262 million(7) ) of
revenue. In Equities, which contributed 96% of 2019 revenues,
Liquidnet is well-diversified geographically, with revenues split
across clients in the Americas (41%), EMEA (43%) and APAC (16%).
Gross assets of Liquidnet as at 30 June 2020 were US$626
million.
Founded in 1999, Liquidnet's nearly 450 employees are largely
based in its New York headquarters. In addition, the Company has
operations in nine other offices globally, including London,
Boston, San Francisco, Toronto, Dublin, Hong Kong, Singapore, Tokyo
and Sydney.
Key terms of the Acquisition
Acquisition Agreement
On 9 October 2020, TP ICAP, Liquidnet, TP ICAP Acquisitions Co.,
a newly incorporated subsidiary of TP ICAP ("Merger Sub") and
Shareholder Representative Services LLC (acting in its capacity as
the security holders' representative) (the "Sellers'
Representative") entered into an agreement (the "Acquisition
Agreement") pursuant to which Merger Sub will merge with and into
Liquidnet. On Completion, Liquidnet will be the surviving
corporation and become a wholly-owned direct or indirect subsidiary
of TP ICAP or New TP ICAP and the separate corporate existence of
Merger Sub will terminate. The Acquisition Agreement is governed by
the laws of Delaware.
As Liquidnet has over 800 stockholders, the Acquisition is
structured as a merger so as to ensure the acquisition of the
entire issued share capital of Liquidnet. As consideration for the
Acquisition, Liquidnet stockholders will receive an initial
consideration (subject to customary adjustments) of US$525 million
in cash, a further US$50 million of non-contingent deferred
consideration comprising the Loan Notes. TP ICAP will pay up to a
further US$125 million depending on the revenue performance of
Liquidnet's Equities business over a three year period commencing
on 1 January 2021. The contingent consideration will become payable
shortly following the end of this three year period.
Under the terms of the Acquisition Agreement, any Liquidnet
stockholder who would be entitled to consideration of a certain
amount or less for their shares will receive that consideration in
cash on Completion. Any Liquidnet stockholder who would be entitled
to consideration above that amount will receive a combination of
cash and Loan Notes on Completion.
Conditions
The size of the Acquisition means that it will be a Class 1
transaction under the Listing Rules. Accordingly, the Acquisition
is conditional upon the approval of TP ICAP shareholders at the
General Meeting.
Completion is also subject to, and can only occur upon
satisfaction (or where applicable waiver) of, the conditions set
out in the Acquisition Agreement which include, amongst others:
(i) certain regulatory and antitrust approvals, including in
particular the approval of the US Financial Industry Regulatory
Authority, the UK Financial Conduct Authority ("FCA"), the Central
Bank of Ireland, the Hong Kong Securities and Futures Commission
and the Singapore Monetary Authority;
(ii) the Scheme becoming effective and admission of New TP ICAP
to the premium listing segment of the Official List and to trading
on the main market of the London Stock Exchange ("New TP ICAP
Admission") having occurred;
(iii) admission of the shares to be issued pursuant to the
Rights Issue (nil paid) to the premium listing segment of the
Official List and to trading on the main market of the London Stock
Exchange ("Rights Issue Admission") having occurred; and
(iv) the representations given by TP ICAP and Liquidnet being
true and correct except as would not have a material adverse effect
on TP ICAP or Liquidnet, as the case may be.
Break fee
If the Acquisition Agreement is terminated in circumstances
where, among other things: (i) the General Meeting is not convened
and held by the requisite time and date; (ii) the Board does not
give or qualifies, changes or withdraws its recommendation to TP
ICAP shareholders either in the Acquisition Circular to vote in
favour of the Class 1 Resolution or in the Scheme Circular to vote
in favour of the Scheme (each, a "Recommendation Change"); (iii)
the Resolution is not passed with the requisite majority at the
General Meeting; (iv) the Court meeting or the general meeting of
shareholders to consider and, if thought fit, approve the Scheme
(together, the "Scheme Meetings ") are not held by the requisite
time and date; (iv) the resolutions to effect the Scheme are not
passed with the requisite majorities at the Scheme Meetings; (v)
the Scheme does not become effective by the requisite time and date
or New TP ICAP Admission does not occur by the requisite time and
date; or (vi) Rights Issue Admission does not occur by the
requisite time and date, TP ICAP must pay a break fee to Liquidnet
of approximately US$17 million (c.GBP13 million(7) ), being an
amount equal to 1% of the market capitalisation of TP ICAP as
calculated, in accordance with the Listing Rules, at 5.00 p.m. on
the last business day prior to the date of the Acquisition
Agreement.
The break fee will not be payable if the Acquisition Circular,
the Rights Issue Prospectus or the New TP ICAP Prospectus is not
published, there is a Recommendation Change, TP ICAP is unable to
hold a vote on the Resolution at the General Meeting by the
requisite time and date, TP ICAP is unable to ensure that New TP
ICAP Admission occurred by the requisite time and date or TP ICAP
is unable to ensure that Rights Issue Admission occurred by the
requisite time and date, in each case, because of:
(i) a material failure by Liquidnet to provide the information,
access or customary representation or comfort letters relating to
the preparation of the Acquisition Circular, the Rights Issue
Prospectus or the New TP ICAP Prospectus;
(ii) a material misstatement or omission in any information
provided by Liquidnet to TP ICAP for the purposes of preparation of
the Acquisition Circular, the Rights Issue Prospectus or the New TP
ICAP Prospectus; or
(iii) a material breach of the representations and warranties
relating to the information provided by Liquidnet for the
preparation, verification or finalisation of the Acquisition
Circular, the Rights Issue Prospectus or the New TP ICAP
Prospectus.
Representations, warranties, covenants and limitations on
liability
Liquidnet has provided TP ICAP with a variety of contractual
protections in the Acquisition Agreement, in particular:
(i) typical representations and warranties for a transaction of
this nature (including with regard to capitalisation, authority,
financial statements, legal and regulatory proceedings, employees
and employee benefit plans, compliance with applicable law and
material contracts);
(ii) covenants relating to how the business will be conducted prior to Completion;
(iii) reasonable access, information, co-operation and
assistance in the preparation of the Acquisition Circular, the
Rights Issue Prospectus and the New TP ICAP Prospectus; and
(iv) reasonable access to Liquidnet's properties, books,
contracts, officers, employees and other personnel and records.
TP ICAP has obtained representations and warranty insurance up
to a maximum coverage of US$57.5 million in respect of the
representations and warranties given by Liquidnet in the
Acquisition Agreement, subject to a customary retention of 0.75% of
the aggregate consideration and certain specified limitations
agreed with the relevant insurers. Save in the case of fraud, TP
ICAP's sole recourse in respect of any representation and warranty
claim against Liquidnet and its stockholders will be under this
insurance policy. The Acquisition Agreement also contains other
customary limitations and exclusions on liability.
Escrow arrangements
On or before Completion, TP ICAP, the Sellers' Representative
and US Bank N.A. will enter into an escrow agreement pursuant to
which US$20 million of the initial cash consideration will be paid
into an escrow account which will be used for any post-Completion
adjustment of the initial consideration payable by Liquidnet
stockholders to TP ICAP. The Liquidnet stockholders' aggregate
liability in respect of any post-Completion adjustment is capped at
US$20 million, which TP ICAP considers to be sufficient for the
purposes of any post-Completion adjustment to the initial
consideration. In addition, up to a further US$2 million will be
paid into the escrow account by Liquidnet stockholders in order to
cover certain other contingencies.
Financing the Acquisition
The Acquisition will be financed through a combination of the
Rights Issue, existing debt facilities and Loan Notes. TP ICAP
operates under a regulatory capital framework and, as such, needs
to maintain certain capital levels. The Acquisition will be largely
financed through equity so as to preserve the regulatory capital of
the Enlarged Group.
The Rights Issue is expected to raise proceeds of approximately
US$425 million. The Rights Issue has been fully underwritten on a
standby basis by HSBC and is expected to be fully underwritten on
launch. The additional US$100 million of the initial consideration
will be financed through the Group's existing debt facilities. The
non-contingent deferred consideration comprises the Loan Notes.
Rights Issue
With respect to the Rights Issue, which is expected to raise
proceeds of approximately US$425 million in GBP, TP ICAP has
entered into a fully underwritten standby underwriting agreement
with HSBC (the "Standby Underwriting Agreement"). The Standby
Underwriting Agreement is expected to remain in place until the
publication of the Rights Issue Prospectus, at which point it will
be replaced by a definitive underwriting agreement (the
"Underwriting Agreement"). The Standby Underwriting Agreement
provides that the price of TP ICAP shares to be issued in
connection with the Rights Issue will be agreed by TP ICAP and HSBC
at the time the Rights Issue Prospectus is published and will be
set out in the Underwriting Agreement. The Standby Underwriting
Agreement contains customary representations and warranties,
conditions and termination rights and the Rights Issue will be
subject to customary conditions (including, for the avoidance of
doubt, the Acquisition Agreement not having been terminated).
Loan Notes
The non-contingent deferred consideration will comprise Loan
Notes to be issued by either TP ICAP or New TP ICAP (at TP ICAP's
discretion) to certain Liquidnet stockholders on Completion. The
Loan Notes, when issued, will represent unconditional,
unsubordinated and unsecured obligations of the issuer and will
rank pari passu with all other unsecured and unsubordinated
obligations of the issuer from time to time outstanding. The
principal amount of the Loan Notes is US$50 million and they will
bear interest at 3.20% per annum, to be paid annually. The Loan
Notes will mature on the third anniversary of Completion unless
repaid in full before that date.
Governance and management
TP ICAP recognises the importance of Liquidnet's employees in
creating its success, and values its cohesive, people-focused
culture.
The Enlarged Group will continue to be chaired by TP ICAP's
Chairman, Richard Berliand, and led by TP ICAP's Chief Executive
Officer, Nicolas Breteau, with Robin Stewart as Chief Financial
Officer and Philip Price as Group General Counsel.
Dividend
The Acquisition represents a transformational step in TP ICAP's
journey towards becoming a leading global provider of market
infrastructure, capable of delivering superior growth over time. In
approving the Acquisition, the Board has taken into account the
medium-term sustainable cash flow generation and capital priorities
of the Enlarged Group, alongside the importance of the dividend to
shareholders.
As previously announced, if the Acquisition is approved by TP
ICAP shareholders, the Board intends to recommend a one-off 50%
reduction of the minimum GBP94 million dividend in respect of the
financial year ending 31 December 2020. This will help fund the
Acquisition and minimise dilution of earnings on a per share basis
of the Enlarged Group as a result of the Rights Issue.
For the financial year ending 31 December 2021 onwards, the
Board intends to introduce a new dividend policy that will target a
dividend cover of approximately 2x underlying earnings. The new
dividend policy reflects a balanced approach to capital allocation
allowing the Group to invest to drive growth, while allowing
dividends to increase with the progress of underlying earnings.
Update on the Redomiciliation
On 23 December 2019, TP ICAP announced the proposed
Redomiciliation through the introduction of New TP ICAP by means of
the Scheme. The Board considers that the Redomiciliation will
result in a corporate structure that should provide greater
financial flexibility for the Group, support effective governance
of the business and allow the Group to become more competitive.
It is intended that the Scheme Circular and New TP ICAP
Prospectus will be published in January 2021 and, subject to
receiving the requisite third party consents (including, but not
limited to, shareholder, regulatory, and court approvals), the
Redomiciliation is expected to complete in early 2021, prior to
Completion.
Summary information on TP ICAP
TP ICAP brings together buyers and sellers in global financial,
energy and commodities markets. It is one of the world's largest
wholesale market intermediaries, with a portfolio of businesses
that provide broking services, data & analytics and market
intelligence, trusted by clients around the world. It operates from
offices in 26 countries, supporting award-winning brokers with
market-leading technology.
www.tpicap.com
Appendix I - Additional financial information on Liquidnet
US$ million 2018 2019 LTM Jun-20
============================== ===== ===== ==========
Operating Revenues 341.5 302.2 339.2
============================== ===== ===== ==========
Reported EBITDA 82.2 31.0 46.9
(+) Equity-based Compensation 7.7 8.3 14.6
(+) Dual Occupancy Expense 6.5 1.6 0.4
(+/-) Other (0.4) 2.1 2.1
------------------------------ ----- ----- ----------
Adjusted EBITDA 96.0 43.0 64.0
============================== ===== ===== ==========
Note: Financials based on US GAAP. This statement may be subject
to amendment by TP ICAP in the Acquisition Circular and the Rights
Issue Prospectus when based on TP ICAP financial statements under
IFRS and / or IFRS-consistent accounting policies adopted by TP
ICAP in its own internal Group statements.
Appendix II - Glossary
Client-to-Client (C2C): System allows only buyside clients to
negotiate and trade with other buyside clients
Dealer-to-Client (D2C): System allows dealers to negotiate and
trade with buyside clients
Notes
1. As of Q2 2020, includes institutional asset management,
pension fund and hedge fund clients
2. As of 30 September 2018, excluding APAC
3. Liquidnet financials based on US GAAP. Adjusted EBITDA
(non-GAAP metric) excludes equity based compensation and other
non-recurring fees totalling US$17 million. This may be subject to
amendment under the IFRS accounting standard
4. As of Q1 2020
5. As of Q2 2020
6. As of LTM, Jun-20; US GAAP accounting standard
7. Converted to GBP at a rate of 1.29 USD
8. Adjusted EBITDA (non-GAAP metric) excludes equity based
compensation and other non-recurring fees totalling US$17
million
IMPORTANT NOTICE
This announcement contains inside information.
This announcement has been issued by, and is the sole
responsibility of, TP ICAP. No representation or warranty, express
or implied, is or will be made by, or in relation to, and no
responsibility or liability whatsoever is or will be accepted by
Merrill Lynch International ("BofA Securities") (as Lead Financial
Adviser to TP ICAP), HSBC (as Sole Sponsor, Joint Financial
Adviser, Sole Global Coordinator and Joint Corporate Broker to TP
ICAP) and Peel Hunt LLP ("Peel Hunt") (as Joint Corporate Broker to
TP ICAP), or any of their respective directors, officers, employees
or advisers, or by any of their respective affiliates or agents, or
any of their respective directors, officers, employees or advisors,
or by any advisor to TP ICAP or by any of their affiliates or
agents as to or in relation to the truth, accuracy or completeness
of the information contained in, or otherwise arising in connection
with, this announcement (or whether any information has been
omitted from this announcement), or any other written, oral, visual
or electronic information made available to or publicly available
(howsoever transmitted) to any interested party or its advisers, or
any other statement made or purported to be made by or on behalf of
BofA Securities and/or HSBC and/or Peel Hunt, or any of their
affiliates in connection with TP ICAP, its subsidiaries or
associated companies, the Acquisition, the Rights Issue Shares (as
defined below) or the Rights Issue, and any responsibility or
liability therefore is expressly disclaimed.
This announcement is not a prospectus but an advertisement and
investors should not acquire the shares to be issued by TP ICAP in
connection with the Prospectus (the "Rights Issue Shares") referred
to in this announcement except on the basis of the information
contained in the Prospectus to be published by TP ICAP in
connection with the Rights Issue. The information contained in this
announcement is for background purposes only and does not purport
to be full or complete. No reliance may be placed by any person for
any purpose on the information contained in this announcement or
its accuracy, fairness or completeness. The information in this
announcement is subject to change.
A copy of the Prospectus, when published, will be available from
the registered office of TP ICAP and on TP ICAP's website at
www.tpicap.com provided that the Prospectus will not, subject to
certain exceptions, be available (whether through the website or
otherwise) to Shareholders in the United States, Australia, Canada,
Japan or any jurisdiction in which it would be unlawful to do so
(each an "Excluded Territory").
Neither the content of TP ICAP's website nor any website
accessible by hyperlinks on TP ICAP's website is incorporated in,
or forms part of, this announcement. The Prospectus will give
further details of the TP ICAP shares being offered pursuant to the
Rights Issue.
The distribution of this announcement into jurisdictions other
than the United Kingdom may be restricted by law, and, therefore,
persons into whose possession this announcement comes should inform
themselves about and observe any such restrictions. Any failure to
comply with any such restrictions may constitute a violation of the
securities laws of such jurisdiction. In particular, subject to
certain exceptions, this announcement and the Prospectus (once
published) should not be distributed, forwarded to or transmitted
in or into the United States or any other Excluded Territory.
This announcement is for information purposes only and is not
intended to and does not constitute or form part of any offer or
invitation to underwrite, sell, issue, purchase or subscribe for,
or any solicitation to underwrite, sell, issue, purchase or
subscribe for, Rights Issue Shares. No offer or invitation to
underwrite, sell, issue, purchase or subscribe for, or any
solicitation to underwrite, sell, issue, purchase or subscribe for,
Rights Issue Shares will be made in any jurisdiction in which such
an offer or solicitation is unlawful. The information contained in
this announcement is not for release, publication or distribution
to persons in the United States or any other Excluded Territory,
and should not be distributed, forwarded to or transmitted in or
into any jurisdiction, where to do so might constitute a violation
of local securities laws or regulations.
The Rights Issue Shares have not been and will not be registered
under the US Securities Act of 1933 (as amended) (the "Securities
Act") or under any securities laws of any state or other
jurisdiction of the United States and may not be offered, sold,
taken up, exercised, resold, renounced, transferred or delivered,
directly or indirectly, within the United States except pursuant to
an applicable exemption from or in a transaction not subject to the
registration requirements of the Securities Act and in compliance
with any applicable securities laws of any state or other
jurisdiction of the United States. There will be no public offer of
the Right Issue Shares in the United States.
The information in this announcement may not be forwarded,
distributed or transmitted to any other person and may not be
reproduced in any manner whatsoever. Any forwarding, distribution,
transmission, reproduction, or disclosure of this information in
whole or in part is unauthorised. Failure to comply with this
directive may result in a violation of the Securities Act or the
applicable laws of other jurisdictions.
This announcement does not constitute a recommendation
concerning any investors options with respect to the Rights Issue.
The price and value of securities can go down as well as up. Past
performance is not a guide to future performance. The contents of
this announcement are not to be construed as legal, business,
financial or tax advice. Each shareholder or prospective investor
should consult his, her or its own legal adviser, business adviser,
financial adviser or tax adviser for legal, financial, business or
tax advice.
The information contained herein is not for publication or
distribution, directly or indirectly, in or into the United States.
This announcement does not contain or constitute an offer for sale
or the solicitation of an offer to purchase securities in the
United States. Any securities referred to herein have not been and
will not be registered under the Securities Act, and may not be
offered or sold in the United States absent registration under the
Securities Act or an available exemption from, or transaction not
subject to, the registration requirements of the Securities
Act.
To the extent available, the industry and market data contained
in this announcement has come from official or third party sources.
Third party industry publications, studies and surveys generally
state that the data contained therein have been obtained from
sources believed to be reliable, but that there is no guarantee of
the accuracy or completeness of such data. TP ICAP has not
independently verified the data contained therein. In addition,
certain industry and market data contained in this announcement
come from TP ICAP's own internal research and estimates based on
the knowledge and experience of TP ICAP's management in the market
in which TP ICAP operates. While TP ICAP believes that such
research and estimates are reasonable and reliable, they, and their
underlying methodology and assumptions, have not been verified by
any independent source for accuracy or completeness and are subject
to change without notice. Accordingly, undue reliance should not be
placed on any of the industry or market data contained in this
announcement.
Notice to all investors
Merrill Lynch International is authorised by the Prudential
Regulation Authority ("PRA") and regulated by the FCA and the PRA
in the United Kingdom. Merrill Lynch International is exclusively
acting for TP ICAP, as Lead Financial Adviser, and no one else in
connection the Acquisition and will not regard any other person as
a client in relation to the Acquisition and will not be responsible
to anyone other than TP ICAP for providing the protections afforded
to its client in relation to the Acquisition, nor for providing
advice in connection with the Acquisition or any other matter,
transaction or arrangement referred to herein.
HSBC is authorised by the PRA and regulated by the FCA and the
PRA in the United Kingdom. HSBC is acting exclusively for TP ICAP,
as Sole Sponsor, Joint Financial Adviser, Sole Global Coordinator
and Joint Corporate Broker, and no one else in connection with the
Acquisition and the Rights Issue, and will not regard any other
person as a client in relation to the Acquisition and the Rights
Issue and will not be responsible to anyone other than TP ICAP for
providing the protections afforded to its client, nor for providing
advice in connection with the Acquisition, the Rights Issue or any
other matter, transaction or arrangement referred to herein.
Peel Hunt is authorised and regulated by the FCA in the United
Kingdom. Peel Hunt is acting exclusively for TP ICAP, as Joint
Corporate Broker, and no one else in connection with the Rights
Issue and will not regard any other person as a client in relation
the Rights Issue and will not be responsible to anyone other than
TP ICAP for providing the protections afforded to its client, nor
for providing advice in connection with the Rights Issue or any
other matter, transaction or arrangement referred to herein.
Apart from the responsibilities and liabilities, if any, which
may be imposed on BofA Securities, HSBC or Peel Hunt under the
Financial Services and Markets Act 2000 as amended or the
regulatory regime established thereunder, none of BofA Securities,
HSBC, or Peel Hunt, in their respective roles, nor any of their
respective affiliates, accept any responsibility whatsoever for the
contents of this announcement, including its accuracy, completeness
or verification or for any other statement made or purported to be
made by any of them, or on their behalf, in connection with TP
ICAP, the Acquisition, the Rights Issue, the Rights Issue Shares or
any other matter referred to herein. Subject to applicable law,
BofA Securities, HSBC, Peel Hunt and their respective affiliates,
accordingly disclaim, to the fullest extent permitted by law, all
and any liability and responsibility whether arising in tort,
contract or otherwise (save as referred to above) in respect of the
use of this announcement, or any statements or other information
contained (or omitted) in this announcement or otherwise arising in
connection therewith and no representation or warranty, express or
implied, is made by BofA Securities, HSBC, Peel Hunt, or any of
their respective affiliates as to the accuracy, completeness or
sufficiency of the information contained in this announcement.
No person has been authorised to give any information or to make
any representation other than those contained in this announcement
and the Prospectus and, if given or made, such information or
representations must not be relied on as having been authorised by
BofA Securities, HSBC or Peel Hunt. Subject to the Listing Rules,
the Prospectus Regulation Rules, the Disclosure and Transparency
Rules and the Market Abuse Regulation, the issue of this
announcement shall not, in any circumstances, create any
implications that there has been no change in the affairs of TP
ICAP since the date of this announcement or that the information in
it is correct as at any subsequent date.
HSBC may, in accordance with applicable laws and regulations,
engage in transactions in relation to the Rights Issue Shares
and/or related instruments for its own account for the purpose of
hedging their underwriting exposure or otherwise. Except as
required by applicable laws or regulations, HSBC does not propose
to make any public disclosure in relation to such transactions.
Cautionary statement regarding forward-looking statements
This announcement may contain certain statements that are, or
may be deemed to be, forward-looking statements, beliefs or
opinions, with respect to the financial condition, results of
operations and business of TP ICAP, Liquidnet or the Enlarged
Group. Forward-looking statements may and often do differ
materially from actual results.
These statements, which may be identified by the use of
forward-looking terminology, including the terms "anticipate",
"believe", "intend", "estimate", "expect", "may", "will", "should",
"seek", "continue", "aim", target", "projected", "plan", "goal,"
"achieve" and words of similar meaning or, in each case, their
negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions, reflect TP ICAP's beliefs and expectations and are
based on numerous assumptions regarding TP ICAP's present and
future business strategies and the environment TP ICAP and the
Enlarged Group will operate in and are subject to risks and
uncertainties that may cause actual results to differ materially.
No representation is made that any of these statements or forecasts
will come to pass or that any forecast results will be achieved.
Forward-looking statements involve inherent known and unknown
risks, uncertainties and contingencies because they relate to
events and depend on circumstances that may or may not occur in the
future and may cause the actual results, performance or
achievements of TP ICAP or the Enlarged Group to be materially
different from those expressed or implied by such forward looking
statements. Many of these risks and uncertainties relate to factors
that are beyond TP ICAP's or the Enlarged Group's ability to
control or estimate precisely, such as future market conditions,
currency fluctuations, the behaviour of other market participants,
the actions of regulators and other factors such as TP ICAP's or
the Enlarged Group's ability to continue to obtain financing to
meet its liquidity needs, changes in the political, social and
regulatory framework in which TP ICAP or Liquidnet operates or in
economic or technological trends or conditions. Past performance of
TP ICAP or Liquidnet cannot be relied on as a guide to future
performance. As a result, you are cautioned not to place undue
reliance on such forward-looking statements. The list above is not
exhaustive and there are other factors that may cause TP ICAP's or
the Enlarged Group's actual results to differ materially from the
forward-looking statements contained in this announcement.
Forward-looking statements speak only as of their date and TP ICAP,
its parent and subsidiary undertakings, the subsidiary undertakings
of such parent undertakings, BofA Securities, HSBC and Peel Hunt,
and any of their respective directors, officers, employees, agents,
affiliates or advisers expressly disclaim any obligation to
supplement, amend, update or revise any of the forward-looking
statements made herein, except where it would be required to do so
under applicable law.
You are advised to read this announcement and, once published,
the Prospectus in their entirety for a further discussion of the
factors that could affect TP ICAP's future performance. In light of
these risks, uncertainties and assumptions, the events described in
the forward-looking statements in this announcement may not
occur.
No statement in this announcement is intended as a profit
forecast or a profit estimate and no statement in this announcement
should be interpreted to mean that earnings per share of TP ICAP
for the current or future financial years would necessarily match
or exceed the historical published earnings per share of TP ICAP.
will operate in and are subject to risks and uncertainties that may
cause actual results to differ materially. No representation is
made that any of these statements or forecasts will come to pass or
that any forecast results will be achieved. Forward-looking
statements involve inherent known and unknown risks, uncertainties
and contingencies because they relate to events and depend on
circumstances that may or may not occur in the future and may cause
the actual results, performance or achievements of TP ICAP or the
Enlarged Group to be materially different from those expressed or
implied by such forward looking statements. Many of these risks and
uncertainties relate to factors that are beyond TP ICAP's or the
Enlarged Group's ability to control or estimate precisely, such as
future market conditions, currency fluctuations, the behaviour of
other market participants, the actions of regulators and other
factors such as TP ICAP's or the Enlarged Group's ability to
continue to obtain financing to meet its liquidity needs, changes
in the political, social and regulatory framework in which TP ICAP
or Liquidnet operates or in economic or technological trends or
conditions. Past performance of TP ICAP or Liquidnet cannot be
relied on as a guide to future performance. As a result, you are
cautioned not to place undue reliance on such forward-looking
statements. The list above is not exhaustive and there are other
factors that may cause TP ICAP's or the Enlarged Group's actual
results to differ materially from the forward-looking statements
contained in this announcement. Forward-looking statements speak
only as of their date and TP ICAP, its parent and subsidiary
undertakings, the subsidiary undertakings of such parent
undertakings, BofA Securities, HSBC and Peel Hunt, and any of their
respective directors, officers, employees, agents, affiliates or
advisers expressly disclaim any obligation to supplement, amend,
update or revise any of the forward-looking statements made herein,
except where it would be required to do so under applicable
law.
You are advised to read this announcement and, once published,
the Prospectus in their entirety for a further discussion of the
factors that could affect TP ICAP's future performance. In light of
these risks, uncertainties and assumptions, the events described in
the forward-looking statements in this announcement may not
occur.
No statement in this announcement is intended as a profit
forecast or a profit estimate and no statement in this announcement
should be interpreted to mean that earnings per share of TP ICAP
for the current or future financial years would necessarily match
or exceed the historical published earnings per share of TP
ICAP.
This information is provided by RNS, the news service of the
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END
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(END) Dow Jones Newswires
October 09, 2020 02:00 ET (06:00 GMT)
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