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Why BGC Is Skyrocketing on a Simple Asset Sale

By Brian D. Pacampara, CFA - Apr 2, 2013 at 1:18PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of brokerage company BGC Partners (BGCP 2.48%) soared a whopping 42% today after agreeing to sell its electronic Treasury trading platform to Nasdaq OMX Group (NDAQ 3.12%) for $750 million in cash.

So what: The total consideration for the deal -- up to $1.23 billion, including an earn-out of up to $484 million of Nasdaq common stock to be paid over 15 years -- is roughly equal to BGC's closing market cap on Monday, so it's obviously a huge value-maximizing transaction for the company. Nasdaq, meanwhile, is making the move to enter the electronic fixed-trading business, but given its own stock's 10% plunge today, it might be paying too high of a price to do it.

Now what: The $750 million one-time payment is expected to be accretive to BGC's EPS upon closing, which should be sometime in mid-2013. "This transaction should better enable investors and analysts to place an accurate valuation on BGC's assets post-closing," BGC Chairman and CEO Howard Lutnick said. "We will also have the financial wherewithal to maintain our dividend for the foreseeable future and to repurchase common shares or units." With the stock now up about 50% over just the past three months, however, I'd wait for a little of the excitement to wear off before buying into that bullishness.

Interested in more info BGC? Add it to your watchlist.

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Stocks Mentioned

Nasdaq, Inc. Stock Quote
Nasdaq, Inc.
$155.64 (3.12%) $4.71
BGC Partners, Inc. Stock Quote
BGC Partners, Inc.
$3.30 (2.48%) $0.08

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