Interdealer broker TP ICAP PLC (LON:TCAP) today confirmed that it has agreed definitive terms to acquire the entire issued share capital of Liquidnet Holdings, Inc. The update is provided several days after TP ICAP said it was in advanced discussions to acquire Liquidnet.

Today, TP ICAP put the total consideration at between US$575 million and US$700 million, comprising cash consideration of US$525 million (subject to customary adjustments) payable on completion of the acquisition, non-contingent deferred consideration of US$50 million and contingent consideration of up to US$125 million.

The acquisition is expected to close in the first quarter of 2021.

The deal provides TP ICAP with substantial electronic trading and workflow connectivity to the buyside. Liquidnet’s global integrated buyside network ranks amongst the largest electronic trading communities in the world, comprising over 1,000 institutional asset management clients. In addition, it integrates with all major order/execution management systems.

Further, the acquisition diversifies TP ICAP’s asset class exposure. Liquidnet’s low-touch buyside-focused cash Equities model delivers expertise across block (or dark) and lit markets and is complementary to TP ICAP’s existing high touch inter-dealer oriented Equities activity, and the Enlarged Group intends to continue to invest in strengthening and growing the Liquidnet business.

The deal is also set to lead to expansion of Liquidnet’s electronic Credit trading offering to the D2C segment of the market. In addition, the deal will see the introduction of a D2C electronic trading offering for the Rates market.

Finally, the acquisition accelerates the growth and development of both Liquidnet and TP ICAP’s data and analytics offerings by leveraging the Enlarged Group’s rich data sets, product and analytical expertise, customer relationships and distribution capabilities.

If the acquisition is approved by TP ICAP shareholders, the Board intends to recommend a one-off 50% reduction of the minimum £94 million dividend in respect of the financial year ending 31 December 2020.

For the financial year ending 31 December 2021 onwards, the Board intends to introduce a new dividend policy that will target a dividend cover of approximately 2x underlying earnings.

The non-contingent base consideration of US$575 million is expected to be financed as follows:

• (i) the issue by TP ICAP of new equity by way of a rights issue to raise proceeds of approximately US$425 million (the “Rights Issue”), which has been fully underwritten on a standby basis by HSBC Bank plc (“HSBC”);
• (ii) US$100 million by drawing down from TP ICAP’s existing debt facilities; and
• (iii) US$50 million to be paid on the third anniversary following Completion, represented by unsecured loan notes issued to certain stockholders in Liquidnet at Completion (the “Loan Notes”).

Additionally, owners of approximately 29% of the issued share capital are supportive of the Acquisition, and have indicated their current intention to vote in favour of the Resolution at the General Meeting.

The Board has approved the Acquisition and intends to recommend unanimously that TP ICAP shareholders vote in favour of the resolution to approve the Acquisition. The directors of TP ICAP who own shares have committed to vote in favour of the Resolution in respect of their own beneficial holdings and, in addition, the executive directors of TP ICAP have agreed to take up their respective entitlements under the Rights Issue.