Agency brokerage and technology firm Convergex has found a more permanent home.
Convergex, which has been owned by private equity firm GTCR, Bank of New York and other shareholders, has been purchased by the Cowen Group for a total consideration, less certain closing adjustments, of $116 million in cash and Cowen common stock.
Upon closing, the transaction will position Cowen as the leading independent trading platform in equities with high quality research and best-in-class global execution capabilities. With combined pro forma brokerage execution revenues of over $400 million in 2016, the transaction solidifies Cowen as a clear leader in U.S. trading volume and expands Cowens reach to 108 countries around the globe, including China. Cowen expects the acquisition to be accretive to economic income per share and return on tangible common equity in 2018.
Convergex is a leading agency-focused global brokerage and trading related services provider with a deep client base of 2,500 hedge funds, asset managers, broker-dealers, trusts and exchanges. Business units include equity sales and electronic trading, commission management, prime services and global clearing.
We are thrilled by todays announcement and welcome Convergexs extremely talented team to Cowen, said Jeffrey M. Solomon, President of Cowen. Together, our combined best-in-class global execution capabilities, along with Cowens high-quality research and corporate finance advisory services, will enable us to continue helping our clients to outperform in challenging markets. The addition of Convergexs global platform will also establish meaningful scale for Cowens equities business by significantly bolstering our capabilities in prime services, commission management, algorithmic and electronic trading, as well as clearing services. We expect that our increased scale will unlock significant economic benefits for our shareholders by providing greater revenue resiliency through market cycles and improved profitability through potential cost synergies.
Eric W. Noll, President and Chief Executive Officer of Convergex Group said, This strategic transaction is an exciting opportunity for both our clients and our employees. Convergex has grown significantly as an agency-focused provider of execution services and trading technology partner. The ability to combine with a great research based firm like Cowen, which has complementary businesses with minimal client overlap, creates a tremendous opportunity for our people and our clients. By forging this combination with enhanced experience and expertise, our respective clients will now have access to a wider array of global offerings and innovative solutions.
The transaction price will be adjusted based on the tangible book value of Convergex at time of closing. The majority of the transaction is to be conducted through cash on Cowens balance sheet and excess cash from Convergex at closing, with the remainder consisting of Cowen common stock based on a 30 day trailing VWAP. The final mix is to be determined at closing by Cowen and the transaction is expected to close by the end of the second quarter, 2017, following customary closing conditions and regulatory approvals. The Convergex transaction is not contingent on the closing of the terms of the strategic partnership between Cowen and China Energy Company Limited, announced on March 29, 2017.
The Company will host a conference call to discuss the transaction today at 8:30 am EST. The call can be accessed by dialing (855) 760-0961 domestic or (484) 747-6320 international. The passcode for the call is 2513661. Those who wish to listen to the live conference call and view the accompanying presentation slides should visit the Events and Presentations section of Cowens website at www.cowen.com/investor-relations/events-and-presentations.
Morgan Stanley & Co. LLC served as financial advisor and Willkie Farr & Gallagher LLP served as legal advisor to Cowen.
Freeman & Co. LLC and Kirkland & Ellis LLP served as advisors to Convergex.
