eSpeed, Inc. (NASDAQ: ESPD), a leader in electronic marketplaces and
related trading technology for the global capital markets, and BGC
Partners ("BGC”),
one of the largest and fastest growing inter-dealer brokers of financial
instruments for wholesale market participants worldwide, today announced
that eSpeed and BGC will merge, and the combined company will be named "BGC
Partners, Inc.”
The combined company will be a world-class provider of voice and
electronic brokerage services in the global marketplace, and will be
positioned to achieve significant growth and to maximize value for its
stockholders. It will benefit from a streamlined product development
pipeline, larger capital base, enhanced ability to attract and retain
brokers, complementary cultures and values, and a management team of
exceptional depth and breadth, all providing a stronger, integrated
platform for continued growth. In addition, the combination is expected
to deliver tangible structural and operating synergies that will drive
expense reductions and revenue enhancements.
After taking into account the effects of the full formation and final
separation from Cantor Fitzgerald, L.P. ("Cantor”),
BGC’s revenues were approximately $249 million
in the first quarter of 2007 and pre-tax income was approximately $24
million. BGC’s projected revenues for the full
year of 2007 are expected to be in excess of $900 million with pre-tax
income in excess of $93 million, excluding costs associated with the
formation, separation and merger transactions. The combined company’s
2007 projected revenues are expected to be approximately $1 billion. For
2008, the combined company’s projected
revenues are expected to increase by more than 12% and to exceed $1.1
billion in annual revenues. The combined company expects to generate a
pre-tax profit margin of approximately 13% and expects to have an
effective tax rate of no higher than 27%, after the effects of the net
operating loss carry forwards. The above revenues and expenses for the
combined company in 2007 and 2008 reflect reductions of approximately
$57 million and $61 million, respectively, because of amounts that have
historically been associated with intercompany revenue sharing
transactions that will now be eliminated subsequent to the merger.
Howard W. Lutnick, Chairman, Chief Executive Officer and President of
eSpeed, commented, "We are extremely proud of
each of these two companies and their strong positions in the
marketplace. eSpeed is the technology driver of BGC’s
voice and electronic broking business, and BGC’s
performance drives eSpeed’s growth. The
integration of BGC’s superior customer
service, execution, and innovation with eSpeed’s
powerful technology platform represents an ideal strategic fit. By
combining these considerable strengths, we will achieve improved
operating efficiencies and strengthen our market position, serving the
best long-term interests of eSpeed’s
stockholders, both companies’ customers and
BGC’s employee-owners.”
Mr. Lutnick added, "Upon closing, we expect
this combination will be immediately accretive to eSpeed stockholders,
and it represents an important milestone in the building of BGC’s
global brand. We fully expect to realize tremendous additional value
over the long term by further building upon the combined company’s
position as a market innovator and leader.” "The strategic rationale for combining BGC
and eSpeed is compelling,” said Lee M.
Amaitis, Chairman and Chief Executive Officer of BGC and Vice Chairman
of eSpeed. "BGC and eSpeed share a vision for
the future of voice, hybrid and electronic trading. This is the next
step in providing exceptional value to our customers through more
efficient joint product development, continuing advancements in trading
technology and superior execution. We believe that the combined company
will generate greater revenue opportunities by applying technology to
improve voice broker productivity, while accelerating the pipeline from
voice to fully electronic trading. Joining forces with eSpeed enables us
to realize new synergies in technology infrastructure, product
development and client coverage.” "Based on the earnings multiples of
publicly-traded companies in our peer group, we believe the value of BGC
is in excess of $1.4 billion,” Mr. Amaitis
said. "Therefore, we believe this transaction
represents exceptional value for eSpeed stockholders as well as
tremendous upside for stockholders of the combined company.” Information Regarding the Transaction and the Combined Company
To acquire BGC, eSpeed will issue in the merger an aggregate of
133,860,000 shares of its common stock and rights to acquire shares of
its common stock. In the transaction, eSpeed’s
shares are being valued at $9.75 per share, a 6.09% premium to the
closing price of eSpeed’s Class A common
stock on May 29, 2007.
The Board of Directors of eSpeed, upon recommendation of a Special
Committee consisting of all four independent Directors, has approved the
Merger Agreement and the transactions contemplated by the Merger
Agreement; determined that the Merger and the other transactions
contemplated by the Merger Agreement are fair to, advisable and in the
best interests of eSpeed and its stockholders; and resolved to recommend
that the holders of eSpeed common stock adopt the Merger Agreement. The
eSpeed Special Committee recommended that the eSpeed Board of Directors
approve the Merger Agreement and the Merger, and received an opinion
from Sandler O'Neill + Partners, L.P., financial adviser to eSpeed's
Special Committee, that the value received in the Merger by the eSpeed
stockholders other than Cantor and its affiliates is fair from a
financial point of view.
In combining eSpeed and BGC, Cantor will be consolidating its large
inter-dealer broker businesses in one public entity, thereby
facilitating future business combinations. The Joint Services Agreement
and Administrative Services Agreement between eSpeed and Cantor will be
terminated at the closing of the merger, Cantor and eSpeed will no
longer provide collaborative marketplaces, and revenue sharing between
them will be terminated. This new structure simplifies and positions the
combined company to consider future business combinations or
opportunities that would maximize shareholder value. For transition
purposes and convenience, at closing, the combined company will enter
into a new back-office operating and administrative services agreement
with Cantor that is designed to create scale efficiencies and reduce
overall costs. Services under the new agreement will be charged to both
companies at cost. The agreement has an initial three-year term and
thereafter may be cancelled by either party on six months’
notice.
As a consequence of entering into the Merger Agreement, BGC will
withdraw its proposed initial public offering of its common stock,
contemplated by its registration statement on Form S-1 filed with the
U.S. Securities and Exchange Commission on February 8, 2007
(Registration No. 333-140531). BGC will continue to use eSpeed’s
name as one of its electronic broking brands. Following consummation of
the Merger, the combined company’s Class A
common stock is expected to trade on the
Nasdaq Global Market under the
symbol "BGCP”.
Management Team
Howard W. Lutnick, Chairman, Chief Executive Officer and President of
eSpeed, will be Chairman and Co-Chief Executive Officer of the combined
company; Lee M. Amaitis, Chairman and Chief Executive Officer of BGC and
Vice Chairman of eSpeed, will be Co-Chief Executive Officer of the
combined company; and Shaun D. Lynn, President of BGC, will be President
of the combined company. Other members of senior management will be
Stephen M. Merkel, Executive Vice President, General Counsel and
Secretary of eSpeed, who will have the same role in the combined
company; Robert K. West, Chief Financial Officer of BGC, who will become
Chief Financial Officer of the combined company; Yevette Tierney, Chief
Information Officer of eSpeed, who will have that role in the combined
company; Bernard Weinstein, Executive Managing Director of BGC Market
Data; and Paul Saltzman, Chief Operating Officer of eSpeed, who will
become Executive Managing Director of electronic trading.
Approvals and Timing
The eSpeed stockholder vote required to approve the proposed Merger is a
majority of the outstanding shares of Class A common stock and shares of
Class B common stock, voting together as a single class, with each share
of Class A common stock entitled to one vote and each share of Class B
common stock entitled to 10 votes. Cantor, which holds approximately
87.7% of the total combined voting power of the shares of Class A common
stock and shares of Class B common stock as of May 29, 2007, has agreed
to vote its shares in favor of the Merger so long as eSpeed’s
Special Committee and eSpeed’s Board of
Directors recommend that eSpeed’s
stockholders vote in favor of the Merger.
The Merger, which was recommended by eSpeed’s
Special Committee and unanimously approved by eSpeed’s
Board of Directors, is subject to eSpeed stockholder approval, FSA, NASD
and other regulatory approvals, and customary closing conditions, and is
expected to close in the fourth quarter of 2007 or early in the
first quarter of 2008.
Advisers
Deutsche Bank Securities and Cantor Fitzgerald & Co. advised BGC and
Cantor in relation to this transaction, and Wachtell, Lipton, Rosen &
Katz and Morgan, Lewis & Bockius LLP acted as their principal legal
advisers. The Special Committee of eSpeed’s
Board of Directors was advised by Sandler O’Neill
+ Partners, L.P., and by the law firm of Debevoise & Plimpton LLP.
Conference Call and Webcast Information
A conference call and Webcast will be held at 8:30 a.m. Eastern Time,
Wednesday, May 30, 2007 to discuss the Merger and the combined company.
To access the conference call, please dial 800-320-2978, domestic and
617-614-4923, international; the participant passcode is 89540660.
A replay of the call will be available from May 30, 2007 at 10:30 a.m.
until midnight, June 6, 2007. The dial-in number is 888-286-8010,
domestic and 617-801-6888; the participant passcode is 96031535.
A live Webcast of the conference call, including audio and PowerPoint
visual presentations, will be available at the "investor
information” section of www.espeed.com.
For additional information about the Merger Agreement and the
transactions contemplated thereby, see eSpeed’s
("the Company”)
Current Report on Form 8-K and exhibits thereto filed by eSpeed with the
Securities and Exchange Commission on May 30, 2007.
Important Information
In connection with the proposed Merger, the Company intends to file a
proxy statement and related materials with the U.S. Securities and
Exchange Commission (the "SEC”)
for the meeting of stockholders to vote on the proposed Merger. BECAUSE
THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION, HOLDERS OF THE
COMPANY’S COMMON STOCK ARE URGED TO READ THEM
CAREFULLY, IF AND WHEN THEY BECOME AVAILABLE. When filed with the SEC,
the proxy statement and related materials will be available for free
(along with any other documents and reports filed by the Company with
the SEC) at the SEC’s website, www.sec.gov,
and at the Company’s website, www.espeed.com.
Participant Information
The Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the Company’s
stockholders in connection with the proposed Merger. Certain information
regarding the participants and their interests in the solicitation are
set forth in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2006, which was filed with the
SEC on March 15, 2007, and will be set forth in the proxy statement for
the Company’s meeting of stockholders to vote
on the proposed Merger. Stockholders may obtain additional information
regarding the proposed Merger by reading the proxy statement and the
related materials relating to the proposed Merger, if and when they
become available.
About eSpeed and BGC eSpeed, Inc. (NASDAQ: ESPD) is a leader in developing and
deploying electronic marketplaces and related trading technology that
offers traders access to the most liquid, efficient and neutral
financial markets in the world. eSpeed operates multiple buyer, multiple
seller real-time electronic marketplaces for the global capital markets,
including the world's largest government bond markets and other fixed
income and foreign exchange marketplaces. eSpeed's suite of marketplace
tools provides end-to-end transaction solutions for the purchase and
sale of financial products over eSpeed's global private network or via
the Internet. eSpeed's neutral platform, reliable network,
straight-through processing and superior products make it a trusted
source for electronic trading at the world's largest fixed income and
foreign exchange trading firms and major exchanges.
For more information, please visit www.espeed.com.
BGC is a leading inter-dealer broker, providing integrated voice
and electronic execution and other brokerage services to banks,
brokerage houses and investment banks for a broad range of global
financial products, including fixed income securities, foreign exchange,
equity derivatives, credit derivatives, futures, structured products and
other instruments, as well as market data products for selected
financial instruments. Named after fixed income trading innovator B.
Gerald Cantor, BGC has offices in the U.S., U.K. and France as well as
Geneva, Copenhagen, Nyon, Milan, Mexico City, Beijing (representative
office), Tokyo, Hong Kong, Singapore, Melbourne, Sydney, Toronto, South
Korea and Turkey.
To learn more, please visit www.bgcpartners.com.
Discussion of Forward-Looking Statements
The information in this release contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are based upon current expectations that
involve risks and uncertainties. Any statements contained herein that
are not statements of historical fact may be deemed to be
forward-looking statements. For example, words such as "may,” "will,” "should,” "estimates,” "predicts,” "potential,” "continue,” "strategy,” "believes,” "anticipates,” "plans,” "expects,” "intends”
and similar expressions are intended to identify forward-looking
statements.
The actual results of eSpeed, BGC or the combined company ("we”,
"our” or the "combined
company”) and the outcome and timing of
certain events may differ significantly from the expectations discussed
in the forward-looking statements. Factors that might cause or
contribute to such a discrepancy for eSpeed, BGC and/or the combined
company include, but are not limited to, the combined company’s
relationship with Cantor and its affiliates and any related conflicts of
interests, competition for and retention of brokers and other managers
and key employees, pricing and commissions and market position with
respect to any of our products, and that of the combined company’s
respective competitors, the effect of industry concentration and
consolidation, and market conditions, including trading volume and
volatility, as well as economic or geopolitical conditions or
uncertainties. Results may also be impacted by the extensive regulation
of our respective businesses and risks relating to compliance matters,
as well as factors related to specific transactions or series of
transactions, including credit, performance and unmatched principal risk
as well as counterparty failure. Factors may also include the costs and
expenses of developing, maintaining and protecting intellectual
property, including judgments or settlements paid or received in
connection with intellectual property or employment or other litigation
and their related costs, and certain financial risks, including the
possibility of future losses and negative cash flow from operations,
risks of obtaining financing and risks of the resulting leverage, as
well as interest and currency rate fluctuations. Discrepancies may also
result from such factors as the ability to enter new markets or develop
new products, trading desks, marketplaces or services and to induce
customers to use these products, trading desks, marketplaces or
services, to secure and maintain market share, to enter into marketing
and strategic alliances, and other transactions, including acquisitions,
dispositions, reorganizations, partnering opportunities, and joint
ventures, and the integration of any completed transactions, to hire new
personnel, to expand the use of technology for screen-assisted,
voice-assisted and fully electronic trading and to effectively manage
any growth that may be achieved. Results are also subject to risks
relating to the proposed Merger, separation of the BGC businesses and
the relationship between the various entities, financial reporting,
accounting and internal control factors, including identification of any
material weaknesses in our internal controls, our ability to prepare
historical and pro forma financial statements and reports in a timely
manner, and other factors, including those that are discussed under "Risk
Factors” in each of eSpeed’s
Annual Report on Form 10-K for the year ended December 31, 2006 filed
with the SEC on March 15, 2007 and BGC’s
Registration Statement on Form S-1 filed with the SEC on February 8,
2007 (Registration No. 333-140531) to the extent applicable.
We believe that all forward-looking statements are based upon reasonable
assumptions when made. However, we caution that it is impossible to
predict actual results or outcomes or the effects of risks,
uncertainties or other factors on anticipated results or outcomes and
that accordingly you should not place undue reliance on these
statements. Forward-looking statements speak only as of the date when
made and we undertake no obligation to update these statements in light
of subsequent events or developments.
