Why BGC Is Skyrocketing on a Simple Asset Sale


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 soared a whopping 42% today after agreeing to sell its electronic Treasury trading platform to Nasdaq OMX Group 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.

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The article Why BGC Is Skyrocketing on a Simple Asset Sale originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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