Business Context and Reporting Period
This Form 8-K, dated November 6, 2018, reports that Virtu Financial, Inc. (the "Company") entered into an Agreement and Plan of Merger to acquire Investment Technology Group, Inc. (the "Target"). The transaction involves a merger where the Target will become a wholly-owned subsidiary of the Company.
Key Financial Metrics and Transaction Terms
- Merger Consideration: $30.30 in cash per share of Target Common Stock, without interest, less applicable withholding taxes.
- Debt Financing: The Company secured a commitment for a $1.5 billion senior secured term loan facility (7-year maturity) and a $50 million senior secured revolving credit facility (3-year maturity) from Jefferies Finance LLC, Royal Bank of Canada, and RBC Capital Markets.
- Use of Proceeds: Financing the acquisition, paying transaction fees, refinancing existing debt of the Target and Company, and general corporate purposes.
- Termination Fee: The Target is obligated to pay a termination fee of $33,760,000 to the Company under specific circumstances, including a change in recommendation by the Target's board or a material breach of the no-shop provision.
- Expense Reimbursement: If Target stockholders do not vote in favor of the merger, the Target must reimburse the Company up to $15,000,000 for transaction-related expenses.
Note: This filing does not provide the Company's current revenue, profit, cash flow, or margin data.
Material Changes and Conditions
The primary material change is the entry into the definitive merger agreement. The transaction is subject to several conditions, including:
- Approval by holders of a majority of the Target Common Stock.
- Expiration or termination of waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act.
- Receipt of required governmental or regulatory approvals.
- Absence of any legal order preventing the consummation of the Merger.
- Accuracy of representations and warranties as of the Closing Date.
The Merger Agreement includes a mutual termination right if the transaction is not consummated by July 6, 2019.
Outlook, Risks, and Management Commentary
Management has agreed to use reasonable best efforts to obtain debt financing and regulatory approvals. The Target has agreed to conduct its business in the ordinary course and recommend the merger to its stockholders. The filing includes standard forward-looking statements regarding the Company's plans to consummate the Merger and realize anticipated synergies.
Key Risks Identified:
- Failure to timely complete the Merger.
- Risks associated with the financing of the transaction.
- Business disruptions due to transaction-related uncertainty.
- Inability to successfully implement integration strategies or realize expected synergies and cost reductions.
Investor Verification Checklist
- Verify the final approval status of the merger by Investment Technology Group, Inc. stockholders.
- Confirm the receipt of all necessary antitrust and regulatory approvals.
- Monitor the closing of the $1.5 billion term loan and $50 million revolving credit facility.
- Review the final terms of the debt financing for interest rates and covenants not detailed in this summary.
- Assess the potential impact of the $33.76 million termination fee and $15 million expense reimbursement on the Target's financial position if the deal fails.