Knight, Getco expect $110 mln in annual cost savings from merger

NEW YORK, April 15 Mon Apr 15, 2013 6:29am EDT

NEW YORK, April 15 (Reuters) - High-speed trading firms Knight Capital Group and Getco Holding Co expect to achieve up to $110 million in annual cost savings within three years of closing their $1.4 billion merger, according to a regulatory filing released on Monday.

The companies said they expect $20 million to $30 million in annual savings after the first year of operating as a single company. The savings are expected to come in part from reductions in infrastructure, personnel and professional fees, the filing said.

The deal, which combines two of the largest U.S. automated trading firms, is expected to close in the first half of 2013.

The companies also said they would issue two-thirds less common shares of the new company to Knight stock holders and Getco unit holders, while increasing the per-share value to $11.25 from $3.75.

The companies said they adjusted the exchange ratio to ensure the trading price of the merged company's common stock closed above the New York Stock Exchange's minimum stock price listing requirement of $4 per share. The adjustment would not affect the amount paid either to Knight stockholders or Getco unitholders.

Jersey City, New Jersey-based Knight said in February it planned to lay off 5 percent of its global workforce - it had 1,524 employees as of year-end - as part of restructuring efforts.

Knight was forced to take on additional investors and re-examine its business following a software problem in August that led to millions of unintentional orders flooding into the market, leaving Knight with a loss of $461.1 million.

Following the glitch, Knight secured $400 million in rescue financing - in exchange for a more than 70 percent stake in the company - from a group of investors that included Chicago-based Getco and was led by Jefferies Group Inc. Jefferies later helped finance Getco's proposed acquisition of Knight.

Profits at closely held, Chicago-based Getco dove in 2012 on soft equity volumes, low market volatility and increased competition.

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