TP ICAP proposed acquisition of Liquidnet Holdings

DirectorsTalk Interviews

TP ICAP plc (LON:TCAP) has confirmed that it has agreed definitive terms to acquire the entire issued share capital of Liquidnet Holdings, Inc. for a total consideration of between US$575 million and US$700 million, comprising cash consideration of US$525 million (subject to customary adjustments) payable on completion of the Acquisition, non-contingent deferred consideration of US$50 million and contingent consideration of up to US$125 million. The Acquisition is expected to complete in Q1 2021.

The Acquisition creates a UK-headquartered, global financial markets infrastructure provider. The Enlarged Group will be well-positioned to benefit from powerful market structure trends related to buyside objectives, such as achieving trade process efficiency and best execution, which are propelling the rapid electronification of financial market trading across multiple asset classes and, in particular, in the dealer-to-client segments of the Credit and Rates markets.

·    Accelerates delivery of the three pillars of TP ICAP’s strategy – electronification, aggregation and diversification

·    Transformational opportunity for TP ICAP to diversify its business mix, accelerate upward shift of revenue growth profile and improve underlying operating margin

·    Leverages Liquidnet’s trading platform and network of over 1,000 buyside clients1 and TP ICAP’s product market expertise and dealer relationships/connectivity to create a new global challenger in electronic Credit and Rates Fixed Income trading

·    TP ICAP intends to continue to invest in Liquidnet’s leading buyside-focused dark/block cash Equities platform, and to preserve its trusted neutral position as an unconflicted agency broker

·    Rights issue to raise proceeds of approximately US$425 million fully underwritten on a standby basis

Commenting on the Acquisition, Brian Conroy, CEO, Liquidnet, said:

“We are energised by the opportunity of combining the strengths of TP ICAP and Liquidnet. This transaction underscores the relevance and future prospects of a business we started two decades ago, and which has grown to become not only a leader in global institutional equities block trading, but also one of the world’s premier buyside-focused electronic networks.  

Together, we will be able to better serve our customers, whilst simultaneously delivering innovative market solutions to a broader range of institutions, across a wider range of asset classes and market segments. TP ICAP’s customer base, unique data assets and global leadership across a range of product markets are highly complementary to Liquidnet and are expected to enable the acceleration of our growth plans across Equities, Fixed Income and Investment Analytics.”

Strategic highlights

The Acquisition accelerates delivery of the three pillars of TP ICAP’s strategy – electronification, aggregation and diversification, and is expected to transform TP ICAP’s earnings profile and growth trajectory. The Enlarged Group’s earnings mix will progressively reflect the contribution from higher growth and higher margin businesses, including electronic D2C Credit and Rates trading and Data & Analytics.

Importantly, the Acquisition:

·    Provides TP ICAP with substantial electronic trading and workflow connectivity to the buyside. Liquidnet’s global integrated buyside network ranks amongst the largest electronic trading communities in the world, comprising over 1,000 institutional asset management clients1, and it integrates with all major order/execution management systems. In addition to delivering substantial customer base diversification, the Liquidnet platform represents a rare foundation upon which to build.

·    Diversifies TP ICAP’s asset class exposure. Liquidnet’s low-touch buyside-focused cash Equities model delivers expertise across block (or dark) and lit markets and is complementary to TP ICAP’s existing high touch inter-dealer oriented Equities activity, and the Enlarged Group intends to continue to invest in strengthening and growing the Liquidnet business.

·    Offers a number of immediately addressable, and sizeable, opportunities, including:

o  Expansion of Liquidnet’s electronic Credit trading offering to the D2C segment of the market, where sizeable competitor platforms serving a rapidly growing marketplace are currently few in number; and

o  The introduction of a D2C electronic trading offering for the Rates market – the largest asset class by volume in the world – which is currently predominantly served by a limited number of large platforms offering D2C trading protocols.

·    Accelerates the growth and development of both Liquidnet and TP ICAP’s data and analytics offerings by leveraging the Enlarged Group’s rich data sets, product and analytical expertise, customer relationships and distribution capabilities.

About Liquidnet

·    Liquidnet is a leading global electronic trading network.

·    Liquidnet is a trusted global specialist in cash Equities dark/block trading, with a growing Fixed Income presence, and an advanced data science capability within its Investment Analytics division.

·    Liquidnet provides its more than 1,000 buyside clients1, who collectively manage US$33 trillion in equity and fixed income assets2, with to access 45 markets worldwide.

·    Built over a 20 year period, Liquidnet’s network is well embedded into institutional workflows, including their signature institutional desktop trading applications and via integrations with major order/execution management systems.

Financial highlights

The Enlarged Group will have the following medium-term ambitions:

·    Mid-single digit cross-cycle revenue growth;

·    Targeting Liquidnet to contribute c.300bps improvement in underlying operating margin and for the Enlarged Group to achieve a 20%+ underlying EBIT margin over the medium-term; and

·    c.£25 – £30 million incremental investment spend by the Enlarged Group on Liquidnet in the 12-24 months post-Completion, which will be focused mainly on technology work related to the D2C Rates opportunity, described above.

Based on TP ICAP’s share price as at close of business on 8 October 2020, the Acquisition is expected to be accretive to underlying EPS in Year 3. The expected financial impact of the Acquisition on underlying EPS will be updated based on the prevailing share price at the time of the Rights Issue.


The Acquisition represents a transformational step in TP ICAP’s journey towards becoming a leading global provider of market infrastructure, capable of delivering strong growth over time. In approving the Acquisition, the board of directors of TP ICAP has taken into account the medium-term sustainable cash flow generation and capital priorities of the Enlarged Group, including the importance of the dividend to TP ICAP shareholders.

As previously announced, if the Acquisition is approved by TP ICAP shareholders, the Board intends to recommend a one-off 50% reduction of the minimum £94 million dividend in respect of the financial year ending 31 December 2020. This will help fund the Acquisition and minimise dilution of earnings on a per share basis of the Enlarged Group as a result of the Rights Issue.

For the financial year ending 31 December 2021 onwards, the Board intends to introduce a new dividend policy that will target a dividend cover of approximately 2x underlying earnings. The new dividend policy reflects a balanced approach to capital allocation allowing the Group to invest to drive growth, while allowing dividends to increase with the progress of underlying earnings.

Financing the Acquisition

The non-contingent base consideration of US$575 million is expected to be financed as follows:

(i)         the issue by the Company of new equity by way of a rights issue to raise proceeds of approximately US$425 million, which has been fully underwritten on a standby basis by HSBC Bank plc;

(ii)        US$100 million by drawing down from TP ICAP’s existing debt facilities; and

(iii)       US$50 million to be paid on the third anniversary following Completion, represented by unsecured loan notes issued to certain stockholders in Liquidnet at Completion.

Strong shareholder support and Board’s recommendation

Additionally, having consulted several of our largest shareholders, owners of approximately 29% of the issued share capital are supportive of the Acquisition, and have indicated their current intention to vote in favour of the Resolution at the General Meeting.

The Board has approved the Acquisition and intends to recommend unanimously that TP ICAP shareholders vote in favour of the resolution to approve the Acquisition. The directors of TP ICAP who own shares have committed to vote in favour of the Resolution in respect of their own beneficial holdings and, in addition, the executive directors of TP ICAP have agreed to take up their respective entitlements under the Rights Issue.

Update on Redomiciliation

Separately, on 23 December 2019, TP ICAP announced its intention to reorganise the Group’s international corporate structure by the establishment of a new holding company in Jersey by means of a Court-approved scheme of arrangement. A separate circular to be issued by the Company summarising the Redomiciliation and a prospectus to be issued by New TP ICAP is expected to be published in January 2021. The Redomiciliation is expected to complete in early 2021.

Webcast details

TP ICAP will host a presentation for investors and analysts today at 9.30 a.m. (UK time):

Webcast link:

Joining by telephone: 

·    United Kingdom (Local) 020 3936 2999 

·    United Kingdom (Toll Free) 0800 640 6441 

·    United States (Local) 1 646 664 1960 

·    All other locations +44 20 3936 2999

Participant access code:

·    621187  Participants will be greeted by an operator who will register their details.

Transaction website

Website link:

Commenting on the Acquisition, Nicolas Breteau, CEO, TP ICAP, said:

“Acquiring Liquidnet is a unique opportunity to transform TP ICAP’s growth prospects by materially accelerating the execution of our electronification, aggregation and diversification strategy.

Liquidnet is a premier, technology-driven, global electronic trading network with more than 1,000 buyside clients1. It has a strong and trusted brand, which we will both retain and develop. We will continue to invest in, and grow, Liquidnet’s leading dark/block Equities business, and maintain its position as a trusted and unconflicted agency broker.

Liquidnet’s electronic network incorporates extensive buyside trade workflow connectivity, including integrations with all major order management and execution management systems.  We intend to build on Liquidnet’s capabilities and connectivity, and expand its offering, particularly in respect of D2C electronic trading in Credit and Rates. Further, we expect to leverage the data assets and analytics expertise of both organisations to drive non-transaction-related earnings.

We believe that TP ICAP’s strong dealer relationships and product expertise are highly complementary to Liquidnet’s electronic capabilities and global buyside customer base. In addition, its global low-touch block cash Equities franchise complements our existing high-touch derivatives and cash Equities activities. Combined, TP ICAP and Liquidnet will be able to offer our clients compelling electronic trading and analytics solutions, driving sustained growth and shareholder value creation over the medium and long-term.”

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