ConvergEx Group said that a July agreement relating to its acquisition by CVC Capital Partners-advised funds has been terminated by mutual agreement. The all-cash transaction, which would have made CVC the largest shareholder in ConvergEx, was originally expected to close in the third quarter this year.
ConvergEx, part owned by BNY Mellon, said that a factor contributing to the decision to terminate the transaction is parallel to investigations by the U.S. Securities and Exchange Commission and Department of Justice. The company understands that these inquiries primarily involve certain non-electronic trade execution practices conducted through its Bermuda subsidiary, ConvergEx Global Markets (CGM). The unit is projected to generate approximately 7% of the company’s total revenues in 2011.
“We want to thank CVC for their interest in partnering with ConvergEx. While we regret that a transaction could not be consummated at this time, the company’s obligations to focus on the regulatory questions raised by the inquiries made it difficult to execute the transaction at this time,” said Joseph Velli, chairman and CEO of ConvergEx.
Velli said: “Since becoming aware of the matters under review, we have taken strong actions to remedy any lapses that have occurred. We are taking additional steps to ensure that we are in full compliance with our own policies and procedures as well as all other regulatory requirements.”
The company has retained outside counsel to conduct a review of its operations. Its Audit and Risk Committee stated: “We take all regulatory questions seriously, and we have zero tolerance for misconduct by any employees of the company. The credibility of the company is paramount and we look forward to reaching an appropriate resolution.”
Velli concluded: “We are focused on running our business and continuing to provide our clients with the high quality services on which they rely…We have discussed this development with our major shareholders, who remain committed to the Company’s growth strategy, organically and through acquisitions.”
Both BNY Mellon and CVC Capital declined to comment.
(JDC)