Battle of the City brokers as BGC makes hostile bid for rival GFI Group

 
Michael Bow
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Shaun Lynn

Interdealer broker BGC Partners yesterday gatecrashed the proposed takeover of rival GFI Group by swooping in with a hostile bid for the broking group. The interdealer broker, which was spun out of Cantor Fitzgerald in 2004, unveiled a $675m (£420m) offer which would create the world’s second largest interdealer broker behind leader

The interdealer broker, which was spun out of Cantor Fitzgerald in 2004, unveiled a $675m (£420m) offer which would create the world’s second largest interdealer broker behind leader Icap.

New York-based GFI, which is already 13.5 per cent owned by BGC, had previously agreed a $655m takeover deal with CME Group in July. A tie-up between BGC and GFI would propel them into the second biggest brokerage in the world, from their respective positions as third and fifth biggest brokers, according to Liberum.

A combined group would also boast £1.27bn of revenues and have one third of the interdealing broker market, knocking Tullett Prebon from second to third place by market share.

“The interdealer broker sector is crying out for further consolidation,” Liberum analyst Justin Bates said. He added a deal would “heap more pressure” on rival Tullett Prebon. BGC president Shaun Lynn yesterday said his board had made advances for GFI in July, which were spurned. BGC is now appealing directly to shareholders in a bid to clinch the takeover BGC’s bid, $5.25 a share in cash, is 15 per cent higher than CME’s offer of $4.55.

It is 68 per cent above GFI’s share price before CME made its offer.

“We had expected to engage in a discussion, and therefore we were surprised to read the press release announcing your agreement with CME Group,” Lynn said in a letter, addressed to GFI’s board. He added that by accepting CME’s inferior offer, GFI directors could be in breach of the board’s fiduciary duties to shareholders.

Interdealer brokers have been under the cosh recently due to lower levels of trading volumes. Tullett Prebon was forced to cut 219 jobs in July after a drop in revenues while industry leader Icap also said it was sacking staff due to ongoing market challenges. BGC shares closed up more than four per cent yesterday.

PROFILE: SHAUN LYNN, BGC PARTNERS

Shaun Lynn rose from a 16-year-old Essex trading rookie fresh out of school to become the second most powerful man at a broking powerhouse. He is currently president of BGC, and bases himself at the group’s vast Canary Wharf office. “He’s a very forthright, honest, down-to-earth guy,” a former colleague of Lynn said yesterday. “He’ll be very blunt about things, but he’s not aggressive. He just expects great things of people.” Lynn joined City stockbrokers Paul E Schweder Miller & Co after leaving school and left after three years to join Purcell Graham during the tumultuous big bang years in the City. He joined Cantor Fitzgerald in 1989 and for the past 25 years has dedicated himself to Cantor and its spin off BGC. “He’s the driving force behind the performance in London,” said Panmure Gordon’s market commentator David Buik, who used to work with Lynn. “He’s very approachable and he has the skill to see when things need to change.”

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