Speed bump

30 May 2007 By Nicole Lee

US electronic broker eSpeed is buying BGC, a fellow Cantor Fitzgerald unit, for $1.3bn a 7% discount to BGC s fair value, Cantor says. But the deal isn t as favourable as it looks. If eSpeed is valued on peer multiples, it is buying BGC for a hefty 17 times 2007 profits.

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Privatelyheld US brokerage Cantor Fitzgerald said two of its subsidiaries are merging in a $1.3bn deal. The smaller business, electronic trading company eSpeed, is buying the larger, interdealerbroker BGC Partners. eSpeed will issue 134m shares to buy BGC, valuing eSpeed shares at $9.75 a share, a 6% premium to the closing price of its common stock on May 29. As a result of the deal, BGC said it is withdrawing its IPO plans.

In recent months, several hedge fund shareholders in eSpeed have voiced strong criticism of the company's ownership structure and have called for a fullscale auction of the business.

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