Investment Technology Group, Inc. (“ITG”) and Hoenig Group Inc. (“Hoenig”) have signed an agreement under which ITG will acquire Hoenig for approximately $115 million, or $12.34 to $12.59 per share of Hoenig. The purchase price will be paid entirely in cash. Closing of the transaction is contingent upon obtaining approval from Hoenig’s shareholders and from regulatory authorities and is expected to occur by the end of the second quarter.
ITG reported that the acquisition is expected to be immediately accretive to ITG’s earnings per share in 2002. As planned synergies are achieved in 2002 and 2003, the purchase should become increasingly profitable.
ITG reported that, had the acquisition taken place on January 1, 2001, Hoenig’s continuing equity brokerage operations would have added approximately $46 million in net revenues (after deducting $46 million of expenses related to independent research services), $3 million in net income and $0.07 in earnings per share to ITG’s 2001 results. Hoenig is expected to have approximately $50 million of cash and cash equivalents at the closing date and has no long term debt. Hoenig’s global brokerage business maintains offices in the New York area, Boston, London and Hong Kong. Hoenig recently announced that it has agreed to sell Axe-Houghton Associates, Inc., its asset management subsidiary in a series of transactions, all of which are expected to have closed by April 30, 2002.
The purchase price is subject to adjustment depending upon the amount received by Hoenig in its previously announced sales of Axe-Houghton. The exact amount per share that Hoenig stockholders will receive will be announced when the Axe-Houghton sales are complete, but in no event less than ten business days before the special meeting of Hoenig stockholders to be held to vote on the transaction with ITG.
“Hoenig expands ITG’s growth opportunities by giving us immediate, high-quality access to the rapidly growing hedge fund market that now accounts for 25-30% of US daily trading volume,” said Raymond L. Killian, Jr., ITG’s Chairman, President and Chief Executive Officer. “ITG’s trading technology, combined with Hoenig’s highly respected expertise in hedge fund client service and trade execution, gives us a powerful new offering to hedge fund clients that should position us to achieve attractive growth rates in this segment.”
Hedge funds currently account for only a small portion of ITG’s customer base but they are heavy users of the company’s Client Site Direct Access products, which provide sophisticated analytical tools, access to virtually every major electronic trading destination and routing to over 50 broker destinations.
“Hoenig brings ITG some of the most highly respected traders, sales and client service people in the business, as well as an established and expanding high-quality client base,” said Robert J. Russel, ITG’s Managing Director of Business Development. “This saves ITG years of investment and opportunity costs to penetrate the hedge fund brokerage business.”
Fredric Sapirstein, Chairman and Chief Executive Officer of Hoenig said, “I believe this transaction benefits our shareholders and provides advanced trading technology to meaningfully enhance the services we deliver to our sophisticated client base. It also will create exciting opportunities for our employees.” Mr. Sapirstein will be a senior consultant to Hoenig following completion of the transaction.
Mr. Russel will assume the role of Chief Executive Officer of Hoenig following completion of the acquisition and lead the current senior management team at Hoenig. Mr. Russel joined ITG as a Senior Vice President in November 1996 after spending nine years with Reuters in a variety of senior roles.