Gain Capital Holdings Inc, parent company of retail forex broker brands Forex.com and City Index, has made a number of additional disclosures and amendments to its M&A disclosure document regarding its planned acquisition by INTL FCStone. FCStone has offered $6 per share in cash for Gain Capital, for a total offer size of $236 million. The deal goes to a Gain shareholder vote on June 5.

Gain made the disclosures after lawsuits were filed by six shareholders against the company, demanding to know more about why the Gain board of directors was approving the acquisition, and how the board members came to their decision. Gain noted that the supplemental disclosure isn’t really required by law, but that the plaintiffs have agreed to voluntarily dismiss their lawsuits in light of this supplemental disclosure – and that removes risk and potential delay from the M&A process with FCStone.

We’d also note that while the Gain board still recommends that shareholders accept the offer and approve the deal at the scheduled June 5 meeting, the board is not exactly unanimous in its view – what started as a 7-1 vote in favor recently turned to 5-3 in favor after two (additional) Gain Capital directors decided that the FCStone offer, originally made in late February, wasn’t enough any more, at least in its current form. Gain Capital has had a very strong start to the the year thanks mainly to increased market volatility, and its recent results and trajectory requires a better offer from FCStone, at least in these directors’ view.

As far as the stock market goes – Gain Capital’s share price remains well above the $6-per-share offer price, with GCAP closing last week at $6.34. Clearly, investors are betting on an improved offer from FCStone, or a breakup of the deal. (We believe it is more of the former – the latter would trigger a $9 million breakup fee payable to FCStone).

To the additional disclosure…..

Gain provided more insight into the sale process it held, which included 108 bidders in addition to FCStone. Gain revealed that it entered into eight mutual confidentiality agreements with other bidders, but none of those resulted in a credible, financed alternative transaction other than the deal with FCStone. The additional disclosure revealed that all eight of the mutual confidentiality agreements described above contained provisions that, following the signing of the merger agreement, permit such counterparty to make confidential proposals to the Gain board.

The additional disclosure revealed more financial and cash flow valuation calculations made by Gain and its advisor GCA. The calculations looked at P/E ratios of other publicly traded retail FX brokers such as CMC Markets, Plus500, IG Group, Interactive Brokers and Swissquote, which vary from 8.0x up to 29.1x (for forward looking 2020e P/E). The analysis also looked at forex sector M&A deal multiples, such as Gain’s own acquisitions of Global Futures & Forex in 2013 and of UK-based City Index in 2014, as well as Rakuten-FXCM Japan, Playtech-TradeFX, and Playtech-Alpha Capital Markets. Those deal multiples varied from 1.1x up to 5.6x (deal value to revenue multiple).

There is probably another chapter to be written before all is said and done with the FCStone-Gain Capital deal, whether or not the deal simply goes ahead as planned, gets improved upon, or gets rejected by Gain shareholders come June 5. Time will tell….

More details on Gain Capital’s disclosures can be seen in its SEC filing here.