Virtu to Buy ITG for $1 Billion to Add Institutional Clients

(Bloomberg) -- Virtu Financial Inc. agreed to buy Investment Technology Group Inc. for about $1 billion, giving the high-speed trading firm a brokerage that has relationships with big institutional investors.

The purchase continues Virtu’s transformation from a company that places bids and offers on exchanges to one that has relationships with customers. Virtu’s $1.3 billion acquisition of rival high-frequency trader KCG Holdings Inc. last year gave it a business that executes orders for retail brokerages. ITG would allow it to build on that growth.

New York-based Virtu will pay $30.30 a share for ITG, according to a statement Wednesday. The target firm’s stock closed at $27.75 yesterday.

“ITG has built a first-class global institutional client franchise,” Virtu Chief Executive Officer Douglas Cifu said. “We are fully committed to growing and improving the complete agency execution offering that ITG’s clients use everyday.”

Competition in the proprietary trading space is intensifying, with Hudson River Trading buying Sun Trading earlier this year. Virtu is one of the biggest speed traders in the world, while ITG has just under 1,000 employees in nine countries.

In ITG, Virtu is acquiring a company that has run afoul of regulators in recent years, including a $12 million settlement with Securities and Exchange Commission announced Wednesday stemming from misstatements and omissions related to the operation of a dark pool. Other SEC sanctions against the firm have included $24 million in penalties over its handling of American Depository Receipts last year and $20.3 million over operation of the dark pool in 2015.

  • ITG said the deal represents a premium of over 40% above its average closing price of $21.55 in the 30 days before reports of a potential sale on Oct. 4
  • Virtu said the deal will increase its revenue contribution from Technology and Execution Services to 37% from 10%, reducing earnings volatility quarter to quarter
  • The transaction is expected to close in the first half of 2019

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