November 4, 2014 / 10:12 AM / 5 years ago

Exclusive: CME sees chance to buy GFI units even if takeover fails

CHICAGO (Reuters) - CME Group Inc will likely have a chance to acquire the pieces it wants of GFI Group Inc even if its bid to buy the derivatives broker falls short, the executive chairman of the futures market operator said on Monday.

Terry Duffy, executive chairman and president CME Group, takes part in a panel discussion titled "Global Markets in Uncertain Times" at the Milken Institute Global Conference in Beverly Hills, California April 29, 2013. REUTERS/Fred Prouser

Terry Duffy, CME executive chairman, said in a wide-ranging interview that he assumed the two GFI units that CME has pursued will be available from “whoever ends up with GFI.”

His comments came the day before GFI has said it will make known its position on a competing takeover bid from BGC Partners Inc, which topped an agreed-upon offer for GFI from CME.

Duffy, in the interview, also spoke about CME’s decision to cut 5 percent of its global workforce, or about 150 jobs, to reduce costs.

CME has grown more efficient after expanding its staff during the past decade to develop expertise on emerging issues, such as the 2010 Dodd-Frank financial oversight, he said.

Duffy denied that the size of CME’s headcount had made the company less nimble, noting that executives have responded to the collapses of brokerages MF Global and Peregrine Financial Group in recent years.

“You look at all the things that this company has faced over the last 7 to 10 years, and we’ve come through it,” Duffy told Reuters. “It’s been very trying and very difficult and very long hours and the bags under the eyes show it. If we weren’t nimble, we couldn’t do that.”

CME will stay focused on controlling costs following the job cuts, he said.

The Chicago-based company, in reporting third-quarter earnings last week, projected expenses for 2015 at $1.3 billion, essentially flat from 2014.

In July, CME said it planned to pay about $655 million for two GFI units, Trayport and Fenics, to expand its reach in the European energy and global foreign exchange markets.

CME planned to acquire the units by buying all of GFI and then spinning off the company’s wholesale brokerage business to a private consortium controlled by GFI management, including Executive Chairman Michael Gooch.

“I don’t know what is going to happen with that transaction, but I’m assuming those technology pieces will be available by somebody,” Duffy said.

Asked whether CME will raise its offer for GFI, Duffy said he felt CME’s bid had “fairly priced” Trayport and Fenics. He declined to elaborate.

Spokespeople for BGC and GFI declined to comment about the deal.

Gooch, through the consortium, is New York-based GFI’s largest shareholder and has agreed to support CME’s acquisition bid. If CME’s bid fails, the consortium has pledged not to support another deal for a year, according to a regulatory filing.

“If in fact BGC decides to go forward with that transaction, they’ll be sitting as a partner of Mickey Gooch’s because of Mickey’s ownership,” Duffy said. “It might be a very untenable situation for both of those folks to be in.”

Fierce competition between brokers like BGC and GFI has long hampered deal-making in the industry.

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